GBP/USD Fundamental Backdrop

The British pound has shown some resilience against the greenback this morning after positive retail sales data (see economic calendar below). Yesterday’s U.S. ISM services PMI reignited support for the USD backing up last week’s Non-Farm Payroll (NFP) data pushing peak rates for 2023 back above 5%. Later this morning, UK construction data could add to the pound upside should actual numbers exceed the expected 52 mark for November. With no more guidance from Fed officials due to the mandatory ‘blackout’ period ahead of the next Fed meeting, forthcoming data and technical levels will take center stage as the primary drivers for GBP/USD.

GBP/USD Economic Calendar

Source: DailyFX Economic Calendar
 

Technical Analysis

GBP/USD Daily Chart

(Click on image to enlarge)

Chart prepared by Warren Venketas, IG

Daily GBP/USD price action remains within the medium-term developing a rising wedge chart pattern (black) as well as a lack of conviction above the 200-day SMA (blue). While the Relative Strength Index (RSI) has the scope to move higher into overbought territory, fundamental headwinds facing the UK still outweigh those in the U.S. economy and may point to a subsequent weakness for the pound.

Key resistance levels:

• 1.2500
• 1.2407

Key support levels:

• 1.2154/200-day SMA
• 1.2000
   

Mixed IG Client Sentiment

IG Client Sentiment Data (IGCS) shows retail traders are currently SHORT on GBP/USD, with 55% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning, we arrive at a short-term cautious bias.

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