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Pound Intends to Rise

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Fundamental analysis of Forex market

On Tuesday, November 6th, the British Pound remains strong against the USD. The key driver for the British currency is still the same as before – the Brexit negotiations. Nevertheless, the statistics matter as well, that’s why any progress in the Brexit talks and enthusiasm that accompanies it is somehow eliminated by weak macroeconomic readings that come from the United Kingdom.

It became known yesterday that the British government continued discussing the Irish border issue, which was believed as one of the most important things that prevented the parties from making progress in the talks.

The statistics published by the United Kingdom early in the week were not too positive. The Services PMI dropped up to 52.2 points in October after being 53.9 points in the previous month and against the expected reading of 53.4 points. The actual reading is the weakest since March, although it’s still higher than the psychologically-crucial level of 50 points, which usually marks decline and growth.

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On one hand, the British economy is looking pretty strong right now and there are reasons to expect the GDP to continue improving. On the other hand, businesses and investors are still concerned about the economic uncertainty and lack of new orders.

This week, there will be a lot of numbers from the United Kingdom, which may really influence the Pound behavior. Some of them worth paying attention to are the preliminary GDP report and the Industrial Production reading to be published on Friday.

As we can see in the H1 chart right now, GBPUSD is testing the support line of the ascending channel. At the same time, there is a divergence in MACD, which may indicate a possible correction soon. If the pair breaks the support line, it may move downwards into the projected channel. The downside targets may be the retracements of 23.6%, 38.2%, and 50.0% at 1.2993, 1.2935, and 1.2889 respectively. After completing the correction, the instrument may start a new rising impulse. The target is the current high at 1.3257.