Chart of the Day GBPUSD

Potential intraday continuation GBPUSD

UK manufacturing business optimism jumped in January: The CBI Trends Total Order Index rose by 6pts to -22 in January (Dec: -28), reflecting a much smaller shrinkage of UK manufacturers’ exports orders, higher output volume, finished stocks. Notably, the quarterly business optimism index jumped to 23 at the start of 1Q (4Q: -44), its first positive reading since 1Q18, reflecting manufacturers’ significant gain in confidence following the signing of US-China phase one trade deal alongside tremendous easing in Brexit uncertainties. 

US Chicago Fed National Activity Index points to slower December growth: The Chicago Fed National Activity Index slipped to -0.35 in December (Nov: 0.41 revised), led by the declines in production-related indicators, thus pointing to slower economic growth at the end of 2019. Three of the four broad categories recorded lower readings while three of them also made negative contributions. Production related indicators made a negative contribution as December industrial production fell 0.3%. Sales, orders, and inventories contributed negatively due to continuous contraction in the ISM manufacturing index. Employment indicator also made negative contribution due to a smaller gain in NFP payrolls

GBP rose sharply after the strong pickup in the CBI survey was seen as reducing the likelihood of an interest rate cut by the BoE on 30th January. The probability is now viewed by markets at around 50%, compared with around 75% at the end of last week. Attention will now turn to tomorrow’s PMI data which may prove pivotal to the decision

From a technical and trading perspective, the GBPUSD has broken out from a triangle consolidation pattern, the upside extension is supported by near and long term volume weighted average prices that are both confirming a bullish bias and the daily and monthly charts. Intraday price patterns are suggesting the potential for further upside continuation as 1.31/1.3095 PPRZ now acts as intraday support a breach of 1.3155 overnight highs will add support to the bullish thesis suggesting the potential for a test of the pivot confluence sited at 1.32, with a test of of offers and stops above the figure a likely scenario

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