GBP/USD Forecast: Sterling weathers several storms, ISM Services PMI key to further gains
- GBP/USD has been holding onto its impressive recovery.
- Cable's ability to withstand a long list of worries implies more gains are likely.
- Tuesday's four-hour chart is showing bulls have gained ground.
"We have reliable supply chains for Christmas" – UK Prime Minister Boris Johnson's soothing words early on Tuesday seem to echo with GBP/USD bulls sentiment that "everything will be alright." A currency pair that weathers stormy seas have room to rise when the winds calm.
In the UK, worries about supply chains are concentrated around the petrol pump. The British army is still helping deliver gasoline to stations but the worst of the crisis could already be in the rearview mirror. If headlines of queues dwindle, sterling could shine.
Another issue that the pound shrugs off on Monday is also related to Brexit – former UK Chief EU Negotiator David Frost reiterated the UK's position that the Northern Irish protocol agreed with the EU is unworkable. Brussels insists on following the accord to the letter. Once again, the pound's ability to rise despite the worsening clash is a sign of strength.
The US dollar is benefiting from some safe-haven flows earl on Tuesday, stemming from a long list of issues. China's indebted Fantasia Holdings and Sinic joined Evergrande in worrying investors about a broader crisis. The massive outage in Facebook and its firms weighed on US tech stocks and dampened the mood – and the US debt ceiling debacle is far from over.
Last but least, inflation remains of worry. WTI Crude Oil hit the highest since 2014, joining soaring natural gas prices and other commodities. The Prices Paid component of the ISM Services Purchasing Managers' Index (PMI) for September is set to grab attention more than the Employment component. The publication is usually eyed as a hint toward the Nonfarm Payrolls, but not this time.
US September ISM Services PMI Preview: Eyes on inflation and employment details
A troubling read in the ISM Services PMI could boost the safe-haven dollar and test GBP/USD's resilience. However, sterling seems well-positioned to hold up once again.
GBP/USD Technical Analysis
Pound/dollar has surpassed the 50 Simple Moving Average on the four-hour chart and benefits from upside momentum. The Relative Strength Index (RSI) has stabilized and remains far from overbought conditions. All in all, bulls are gaining ground.
Resistance awaits at 1.3645, Monday's high point. It is followed by 1.3695, which capped GBP/USD in late October. Further above, 1.3725 and 1.3750 await the bulls.
Support is at 1.3580, the daily low, followed by 1.3525, a stepping stone on the way up. Far below, the late September abyss line of 1.34 comes into play.
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Author
Yohay Elam
FXStreet
Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.
