GBP/USD Forecast: Channel resistance continues to cap ahead of UK Construction PMI

Broad-based USD weakness helped GBP/USD to reverse an early dip on Monday.
The narrowing gap between Conservatives and Labour capped any further gains.
Traders eye UK Construction PMI, trade headlines for some meaningful impetus.

Haresh Menghani FXStreet

The GBP/USD pair opened with a modest bearish gap on the first day of a new trading week in reaction to the latest BMG Research poll for The Independent, which showed narrowing gap between the ruling Conservatives and the Labour Party. The pair, however, managed to attract some dip-buying interest near the 1.2900 handle and finally ended near the top end of its daily trading range amid a fresh wave of the US dollar selling bias.

The US President Donald Trump’s latest move to restore steel and aluminium tariffs on Brazil and Argentina added to the recent uncertainty over a potential US-China trade deal. Meanwhile, the US Secretary of Commerce Wilbur Ross told Fox News that Trump is willing to increase tariffs if there is no deal and further collaborated to the USD weakness. The greenback was further weighed down by Monday's disappointing release of the US ISM Manufacturing PMI, which unexpectedly fell to 48.1 in November and marked the fourth consecutive month of contraction.

The overnight uptick lacked any strong follow-through buying and remained capped near a resistance marked by the top end of a multi-week-old descending trend-channel. Market participants now look forward to the UK Construction PMI, which coupled with fresh UK political headlines, might influence the British pound. Apart from this, the focus will remain on trade developments, which might continue to act as an exclusive driver of the USD price dynamics and further contribute towards producing some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, bulls are likely to wait for some strong follow-through buying beyond the trend-channel resistance before positioning for any further near-term appreciating move. Above the mentioned barrier, the pair is likely to aim towards reclaiming the key 1.30 psychological mark. The momentum could further get extended towards the 1.3045-50 region intermediate resistance en-route the 1.3100 round-figure mark.

On the flip side, any meaningful pullback might continue to find some support near the 1.2900 handle, which if broken might accelerate the slide further towards the 1.2830-25 horizontal support. Failure to defend the mentioned support might then turn the pair vulnerable to break below the 1.2800 round-figure mark and slide further towards challenging the trend-channel support, near the mid-1.2700s.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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