GBP/USD is moving to the upside in today’s session, currently trading near the 1.2478 level, up 0.50% over Monday’s North American close. The pair also attempted a move to the upside on Monday, but came under pressure and pulled back from the high of the session. The price action left in place another failed test of overhead resistance near the 1.2500 level.
A sustained move above 1.2500 is required to turn the near term outlook for the pair more positive and suggest a follow through advance to the November 11th high at 1.2674 is possible.
Continuing to fail up against 1.2500 keeps pair at risk for a near term drop to the November 18th 1.2300 low, which represents a test of the upper boundary of the trading range which encompassed price action following the October 7th flash crash in the sterling. Failing to hold this support would leave the target at the lower boundary of the trading range at the 1.2083 level, followed by the low of the crash at 1.1950.
At present, the probabilities appear to suggest the 1.2500 level, which represents an approximate 50% retracement of the decline from the November 11th intraday high to the November 18th intraday low, will be able to keep a lid on rally attempts. The recent numerous failed tests of this retracement level underscores the pair’s overall weakness.
In addition, the ongoing resilience of the US dollar should work to keep a lid on rally attempts in GBP/USD over the near term. However, among the major currencies, sterling is holding up best versus the dollar. Thus, the losses in GBP/USD could remain muted relative to those among other major currencies.
On the calendar in today’s trading is the second estimate of US Q3 GDP. Economists expect the figure to be revised up to 3.0% from the first reading of 2.9%. Also, US November consumer confidence is on the calendar. This month, expectations are for a reading of 100, up from 98.6 in October.