GBP/USD Rally Halts, Here’s Key Resistance Turned Support

Key Highlights

  • GBP/USD surged above the 1.3300 resistance level before correcting lower.
  • It broke a key contracting triangle with resistance near 1.3300 on the 4-hours chart.
  • The UK Manufacturing PMI increased from 53.7 to 55.2 in Nov 2020 (Preliminary).
  • Gold price is trading well below $1,900 and it broke the key $1,850 support.

 

GBP/USD Technical Analysis

After forming a support base near 1.3200, the British Pound started a strong increase against the US Dollar. GBP/USD broke a major hurdle near 1.3300 to move further into a positive zone.

Looking at the 4-hours chart, the pair cleared many hurdles near 1.3300 and a key contracting triangle. The pair even climbed above the 1.3320 pivot level and settled well above the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

The pair traded close to the 1.3400 level before correcting lower sharply. On the upside, 1.3400 level is a strong barrier. The next key resistance is near 1.3420, above which the bulls might aim a test of the 1.3500 resistance.

If there is a fresh downside correction, the recent breakout resistances near 1.3310 and 1.3300 are likely to act as strong supports.

Fundamentally, the US Manufacturing PMI for Nov 2020 (Preliminary) was released yesterday by both the Chartered Institute of Purchasing & Supply and Markit Economics. The market was looking for a drop from 53.7 to 50.5.

The actual result was positive, as the UK Manufacturing PMI increased from 53.7 to 55.2. However, the UK Services PMI came in at 45.8, down from the last 51.4.

The report added:

Business activity across the UK private sector decreased in November, which ended a four-month period of expansion. The downturn was driven by the fastest reduction in service sector output since May amid temporary business closures among leisure and hospitality companies.

Overall, GBP/USD broke a major hurdle and it is likely to continue higher. Looking at EUR/USD, the pair remained in a positive zone above 1.1820. Conversely, gold price is still well below the $1,900 resistance zone and it remains at a risk of more downsides.

Upcoming Economic Releases

  • German Gross Domestic Product for Q3 2020 (YoY) – Forecast -4.3%, versus -4.3% previous.
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  • German IFO Business Climate Index for Nov 2020 – Forecast 90.7, versus 92.7 previous.
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