GBP/USD Forecast: Cable range-bound above $1.3500 as manufacturing is seen rising

The US Dollar is in a consolidation phase during the second week of January after falling lower at the beginning of 2018. The GBP/USD is trading down 0.2% at around $1.3515 before the only important macro data this week on manufacturing output.

The UK manufacturing output is seen rising 0.3% m/m in November supporting the pickup of the index of industrial production from stagnation in October. Only the headline number above or below expectations has the power to move the GBP/USD away from the current range-bound trend.

The UK Prime Minister Theresa May’s attempt to restructure her government earlier this week hit the fierce opposition within her government as health minister Jeremy Hunt refused to leave while education secretary Justine Greening decided to quit. The political jitters, however, failed to send GBP/USD lower past $1.3500.

The GBP/USD is currently trading in a sideways move after hitting the cyclical high of $1.3608 last week and the currency pair is likely to remain capped in a tight range of  $1.3510-$1.3550, both representing 38.2% and 23.6% Fibonacci retracement of the upmove from $1.3340 to $1.3608.
 
The technical oscillators are at lower levels with both Relative Strength Index and Slow Stochastics moving upwards from the Oversold territory. The move lower on GBP/USD is now targeting $1.3510 level representing 38.2% Fibonacci retracement of the upmove from $1.3340 to $1.3608.
 
Should the Fibonacci boundary be broken on the downside, next hurdle is a psychological support line of $1.3500 and then $1.3480 representing 50% Fibonacci retracement of the current upmove.