GBP/USD eyes Sept 2017 highs ahead of UK construction PMI

The bulls weakened their grip in mid-Asia, allowing a brief phase of consolidation in the GBP/USD pair near four-month tops of 1.3605, as investors gear up for the UK construction PMI release.

GBP/USD: USD still remains the key driver

Amid risk-on trades seen in the Asian equities and positive oil prices, the spot remains better bid, largely unperturbed by a tepid broad-based US dollar recovery.  Markets switch their positions and prefer to hold the US currency heading into the key FOMC Dec meeting minutes.

Meanwhile, the pair appears to gather pace for a test of September 2017 highs reached at 1.3657, having surpassed the Dec tops of 1.3552 in the US last session. The recent upsurge in Cable was mainly driven by broad USD weakness while a lack of Brexit headlines (mostly seen as bad) also added to the upside risks in the pound.

More so, the sharp drop in the UK manufacturing PMI reading was also shrugged-off by markets, as the data suggested a solid close to 2017. The UK manufacturing PMI drops sharply in Dec, misses estimates

Valeria Bednarik, Chief Analyst at FXStreet wrote: “This Wednesday, the UK will see the release of the December construction PMI, expected at 52.7 from previous 53.1, but overall the negative sentiment towards the greenback is what leads the pair higher, and for that, market players will be looking at FOMC Minutes for clues.”

GBP/USD Technical Levels

Bednarik added: “The short-term picture shows that the pair is extremely overbought, with the RSI in the 4 hours chart currently above 81, but still heading higher, while the Momentum indicator presents an upward slope, although a bit more moderate, but at its highest in over a month. While a bearish corrective movement can't be dismissed, the risk is still towards the upside, with the main target being the mentioned 2017 high. Support levels: 1.3570 1.3530 1.3495. Resistance levels: 1.3610 1.3655 1.3700.”