GBP/USD Experiences Profit-Taking Despite Stronger Than Expected Services PMI

The Cable’s intraday rally topped out at our 1.6679 resistance, or October 30 highs, as we anticipated.  Bulls are stalling and taking profits after an incredible run with investors awaiting today’s data from the U.S. and tomorrow’s BOE and ECB meetings.  Speaking of data, Britain’s Services PMI came in above analyst expectations today, indicating expansion with a reading of 51.7.  Today’s Services PMI combines with climbing Construction and Manufacturing PMIs to make a home run for Britain as far as Purchasing Manager Indexes are concerned.  Hence, we continue to see the Pound exert relative strength and we view today’s movement as healthy weakness.  Meanwhile, if the Cable can defeat our 1.6679 resistance we may witness the beginning of another near-term bull run towards the psychological 1.70 level.  Our trend lines are gradually reaching their respective inflection points, though these collisions won’t occur until next week.  We placed a new tight near-term uptrend line on our chart to give an idea of where strong uptrend support sits.

All eyes will be on the U.S. today with a wave of key economic releases at bat and the Halifax HPI and BOE meeting on deck.  Therefore, we anticipate the volatility in major Dollar pairs to pick up and the present consolidation period may end quickly.  Today’s performance of the GBP/USD will rely heavily on the S&P futures and their ability to hold above May highs and our 2^nd tier uptrend line.  If U.S. equities can build upon their upward momentum, then the Cable may follow suit due to their positive correlation.  We’ve seen considerable volume on up bars and we have yet to view a fundamental pullback.  Therefore, we maintain our bullish outlook on the GBP/USD trend-wise.

Fundamentally, we find resistances of 1.6522, 1.6587, 1.6679, 1.6734, and 1.6854.  To the downside, we see supports of 1.6462, 1.6379, 1.6343 1.6307, and 1.6233.  The 1.65 level acts as a psychological cushion with 1.70 serving as a psychological barrier.  The GBP/USD is currently exchanging at 1.6501.

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