GBPUSD was previously consolidating inside a symmetrical triangle pattern on its 1-hour time frame before price decided to go for an upside breakout. This signals that buyers are taking control of price action and are ready to push for more gains. The chart pattern is approximately 700 pips tall so the resulting breakout could last by the same number of pips.
The 100 SMA is above the 200 SMA so the path of least resistance is to the upside. In addition, the gap between the moving averages is widening, which suggests that buying pressure is getting stronger. However, stochastic is on the move down, indicating that bearish momentum could return.
In that case, a pullback to the broken triangle resistance around the 1.3200-1.3250 area could take place before GBPUSD resumes its climb. A larger correction could last until the dynamic support around the moving averages closer to 1.3150.
Data from the UK economy has been mixed recently, as the manufacturing PMI was downgraded to show a sharper contraction in the industry while the construction PMI enjoyed a small upgrade. The services PMI is due today and no change from the initial 47.4 estimate is eyed, although a downgrade could mean sharp declines for the pound ahead of tomorrow’s BOE decision.
The UK central bank is widely expected to cut interest rates by 0.25% and issue downgrades on their growth and inflation estimates. In their previous policy statement, only one MPC member voted to cut while the rest preferred to wait for more information before adjusting policy. PMI readings after the Brexit vote fell to record lows, supporting the case for additional easing.
As for the US dollar, data came in mixed yesterday as personal spending beat expectations while personal income fell short. The core PCE price index came in line with expectations of a 0.1% uptick. US ADP non-farm employment change and ISM non-manufacturing PMI are up for release today, possibly setting the tone for Friday’s NFP release.