Is GBP/USD in Bullish Mode?
The British Pound Brushed Off The Recent Decline After The Upbeat UK Economic Data.
The British pound erased its previous losses after the positive UK construction data released earlier today. The currency found support as the US dollar eased ahead of the US employment data which could provide a firm outlook over the speculated Fed rate hike. Most of the traded currencies found a breather on Friday’s session due to the weakness of the greenback, however, sterling was the winner of the track with a 0.25 percent advantage. Investors will likely remain cautious in the coming days considering the recently concluded OPEC meeting and the upcoming US central bank meeting. Can the sterling remain in bullish mode with post Brexit risks on the side?
GBP/USD Hour Chart
At the time of writing, the sterling shrugged off the downward momentum it met after the stress test conducted by the Bank of England. The British pound traded higher against the US currency at 1.2624. The pair opened at 1.26475 with a session high of 1.26369 and a session low of 1.26171.
GBP/USD has been trading above its 50-day SMA of 1.25633 and touched its 20-day SMA of 1.25966 in the mid-session, but still has managed to move upward. The pair found resistance at 1.26469 and support at 1.25844. If the uptrend stays, there will be new resistance at 1.26469 while a fall through may result in a new support at 1.25625.
As the hourly GBP/USD chart shows, the pair trades close to its Thursday peak of 1.26937 as the bullish candles continue to appear. The band will likely take the pair above 1.26000 level; thus, there’s a reasonable chance that GBP/USD will close on this level at the end of the Friday session.
Beating the market expectations, the Markit/CIPS Construction PMI increased 52.8 in November, the highest expansion in the construction activity since March. The figures went ahead of the 52.6 rise in October due to the remarkable improvement of employment levels, increased in business activities and input buying. Apparently, the business companies have taken a step forward after the market fluctuation over the UK referendum last June.
The huge-to-modest return of the residential construction sector came from the rise of the commercial work. Also, all the delayed projects after Brexit have started to materialize clearly because of the comeback of economic confidence. Around 170 companies were surveyed to obtain the current result of the PMI.
In details, the United Kingdom housing starts stood at 40970.000 compared to the previous 39910.00 while the Housing Index came at 703.70, higher than the 694.00 before. The construction output was at 0.80 in the past, but it went to 0.20 in the current data. Construction orders were at 7.50, far from its recorded peak of 37.40. Also, home ownership rate touched 7.50 compared to the -1.50 the previous month.
The upbeat data boosted the growth expectation for the Great Britain amid the doubts emerging in the market. If the economic health is sustainable, the central bank of the UK may consider a rate hike in 2017 after the negotiations over Britain’s “full exit.” An increase in rate hike will definitely support an uptrend of the British pound.