The Cable has ignored much of the market’s trend as of late and closed last week significantly higher despite some poor performance in Thursday and Friday’s sessions. The pair surged higher early in the week which came mainly as a result of the significant improvement in UK CBI Realised Sales. Additionally, a contraction in the US Markit Flash Manufacturing PMI helped to keep the Pound climbing. Looking to the week ahead, the UK has a number of PMI releases which are worth keeping an eye on as they could signal that the Cable is finally ready to bounce back.
Unexpected surges for the Cable took much of the market by surprise last week given the general swell in sentiment towards the USD. However, a major uptick in UK CBI Realised Sales from -13 to 7 provided plenty of buying pressure in the early half of the week. Moreover, a contraction in the US Markit Flash Manufacturing PMI to 50.5 was capitalised on by the Pound and this saw the pair soar to 1.4703 before reversing. However, the Cable lost momentum as the week came to a close as the UK GfK Consumer Confidence result dropped once again.
Looking at the technical data, the Cable has become bullish in the past few weeks and looks set to continue the trend. Looking at the daily chart, EMA activity is becoming steadily more bullish which could see the Pound extend last week’s gains and challenge resistance around the 1.4737 mark once again. Additionally, RSI remains neutral which gives the pair come flexibility to move in the coming week. What’s more, recent ADX activity is signalling that the cable could carry some of its recent momentum through to subsequent sessions.
As we move forward, the focus will be on a number of key UK PMI results which are due out shortly. Namely, the impending UK Manufacturing, Construction, and Services PMI’s are due and could help the Ppound to hold onto recent gains. Currently, the PMI results are expected to post improvements across the board which could provide some buoyancy throughout the week. Additionally, if the forecasted contraction in the US ISM Manufacturing PMI is realised, the GBP/USD might rally once again.
Ultimately, the Cable has been low for a long time and as strong UK fundamentals begin to be posted, the GBP/USD could finally enter a bullish phase. Additionally, as pro-Brexit rhetoric begins to wind down, sentiment should begin to return to the Cable especially given recent heartening economic results. However, the looming spectre of a June rate hike for the US could cap future upside potential for this pair despite the bullish technicals and improving fundamentals.
