GBP/USD is higher in this morning’s trading, currently holding near the 1.264 level, up more than 1% over Wednesday’s North American close.
The pair has finally cleared the 1.2500 level, an area which GBP/USD had struggled up against in recent days. However, with today’s solid breakout, the target is at the November 11th high at 1.2674. Among the major currencies, sterling continues to hold up best versus the dollar.
A move above 1.2674 would leave the next target at former key support at the lows established in July and August at the 1.2798-1.2866 zone. A move above this area of resistance is required to suggest a sustainable low has been established in GBP/USD.
With today’s move to the upside, new first support is at the 1.2500 level. This area must hold on a pullback in order to keep the bullish implications of today’s price action intact. A quick drop back below this level would turn the outlook more bearish and leave the target at 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.
In today’s news, the UK’s Markit/CIPS Manufacturing PMI fell to 53.4 from 54.2 in October, undershooting expectations for a rise to 54.5 in a Reuters poll of economists. A clear majority of respondents who offered a reason for rising costs pointed to the weakness of the pound, which is down about 19% against the dollar compared to its level before the June Brexit vote.
Later today in the US, initial jobless claims are on the calendar, as is construction spending and the ISM manufacturing survey. October construction spending is projected to come in showing an increase of 0.6% following a decline of -0.4% in September. Regarding the ISM Index, economists expected the figure to rise slightly to 52.1 from 51.9 in October.
The key report for the week, however, is nonfarm payrolls for November on Friday. This figure will be particularly important given the expectations for a rate hike in December. Consensus estimate is for an increase of 180K jobs. The strong ADP report released yesterday sets a positive tone for the BLS report on Friday.