The GBPUSD is extending to new day highs as the NY traders come in and continue the trend move to the upside. The pair was influenced today by better UK Markit PMI data which came in at 53.5 vs.53.0 estimate. A lower than expected US Black Friday sales may also be weighing on the USD in trading today, and helping to contribute to the GBPUSD’s buoyancy. For the UK PMI data, last month was revised to 53.3 from 53.2. The low for the year came in September at 51.6. The high for 2014 peaked at 57.0. At 53.5 it is still below the midpoint of the years range at 54.3 but for a Monday, it provided some upside momentum for the pair.
UK Markit PMI was higher than estimate but is below the years midpoint at 54.3.
Looking at hourly chart of the GBPUSD, the price is currently testing – and moving above – the highs for the day and a ceiling area at the 1.57347-1.57398. This is a key area and sellers are trying to keep a lid on it, but there seems to be good two way flows as shorts feel the pressure. With the low to high trading range for the day overextended at 162 pips currently, with the average being 107 over the last 22 trading days, one might expect some selling in this area. However, on the correction off the initial high for the day, the pair found support buying against the 200 hour MA (green line in the chart below) at the 1.5692 level. So buyers showed up where you would expect them to be. They remain in control today. If the sellers want to wrestle back control, they have to prove they can hold this area, but there should also be buyers on dips.
GBPUSD is moving above a ceiling area. Key test for the GBPUSD.
What is also contributing to the more favorable technicals is that the low for the day, took out the low for the year by 4 pips (to 1.5584 vs the old low at 1.5588 – see the daily chart below). The failure to break and move lower may have traders looking for the bottom to be in place and the potential for a more meaningful corrective move higher. On the daily chart below, the 1.57203 level is the 61.8% of the move up from the 2013 low to the 2014 high. I will be watching this level for support now. If the price cannnot move back below this area, the shorts will continue to feel the pressure from the trend day higher today.
The easy thing to say is sell. The range is large, a high area is being tested. However, the price action against the new year low, the momentum bounce off the 200 hour MA , the move back above the 1.5720 level, the trend day characteristics has me thinking “the buyers are in control still and the sellers have not really proved anything”.
For what it is worth, there have been a number of downgrades/sells for the GBPUSD today as reported by Ryan (see posts here and here). They are off to a bad start so far.
The GBPUSD made new year lows today but only by 4 pips. The failure has shorts covering.