The British pound surged higher against the US dollar yesterday. There were two main reasons for the rise in the GBP/USD pair. First, the UK manufacturing PMI was released, which exceeded market expectation by a fair margin, registering a healthy reading of 57.5. Second, the US ISM manufacturing PMI, which was published during yesterday’s NY session, missed the forecast. The US dollar traded lower against the British pound after these events. GBP/USD traded as high as 1.7165 yesterday. Currently, the pair is consolidating its recent gains.
Technically, there is a channel forming on the 4-hour time frame, contributing to the upside halt in GBP/USD. The pair has managed to clear the 1.236 Fibonacci extension of the last down-move from the 1.6995 high to the 1.6692 low. If buyers gain control, then a move towards the 1.618 Fibonacci extension is possible in the short term, which is at 1.7185. It is from this level that the pair may correct lower in the short term. Any further strength could take the pair towards the 1.7200 resistance area.
If the pair moves lower from the current levels, then it may find support around the 1.7130-20 support area. As long as the pair is trading above the broken 1.236 Fibonacci extension, the chance of a move towards the 1.618 Fib extension is likely.
The RSI on the 4-hour time frame is around extreme levels, which may cause a consolidation or a small pullback in the short term. However, this would not yet place the pair in a bearish zone. Buying dips may not be a bad idea in the short term for the GBP/USD pair.
- IKOFX Technical Team
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