GBP/USD Analysis: Sits at 7-month tops amid UK political optimism, NFP eyed for some impetus
|- GBP/USD remains well supported by increasing odds of a majority for Conservatives.
- Bulls take a breather amid extremely overbought conditions and ahead of NFP report.
The British pound remained one of the top-performing currencies on Thursday and lifted the GBP/USD pair to fresh multi-month tops. The fact that the incoming UK election polls have been indicating a majority for the Prime Minister Boris Johnson's Conservative Party at the upcoming general election on December 12 continued driving the pair higher for the fifth consecutive session. The pair climbed to levels above mid-1.3100s and was further supported by persistent selling bias surrounding the US dollar. Against the backdrop of the recent disappointment from the US macro data, mixed trade signals did little to impress the USD bulls and remained supportive of the pair's strong positive momentum to the highest level since early-May.
In the latest development, China on Thursday reiterated its expectations that tariffs should be lifted as part of a phase-one deal. This comes on the back of a Bloomberg report on Wednesday that both sides are moving closer to a trade deal before the December 15 tariffs deadline. Meanwhile, the US President Donald Trump's remarks on Wednesday, saying that talks with China were going very well, marked a complete turnaround from the previous day's comments that a trade deal with China may not come until after the 2020 US presidential election. Trump's conflicting signals further added to the confusion and contributed to investors’ nervousness.
As investors digested the recent UK political optimism and trade-related headlines, the pair now seems to have entered a bullish consolidation and was seen consolidating in a narrow trading band through the Asian session on Friday. Extremely overbought conditions on short-term charts turned out to be one of the key factors holding investors from placing any aggressive bets ahead of the closely-watched US monthly jobs report, scheduled for release later during the early North-American session.
Short-term technical outlook
From a technical perspective, the pair retails its bullish stance near 200-week SMA. However, traders are likely to wait for some follow-through buying beyond May monthly swing high resistance, around the 1.3175-80 region, before positioning for any further appreciating move. Above the mentioned hurdle, the pair seems all set to surpass the 1.3200 handle and head towards testing the next major hurdle near the 1.3240 region. The momentum could further get extended and assist the pair to aim towards reclaiming the 1.3300 handle.
On the flip side, any meaningful pullback now seems to find some support near the 1.3100 round-figure mark, which if broken might prompt some near-term long-unwinding trade and accelerate the slide further towards a support near mid-1.3000s. A subsequent slide will still be seen as a buying opportunity and help limit the downside near the key 1.30 psychological mark.
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