GBP/USD Continues Uptrend and Breaks Above 1.34

The British pound rallied above the 1.3400 level against the dollar on Tuesday as the greenback is once again seen declining against all of its major counterparts.

PMI data from the UK today showed output rising at its fastest pace in more than six years. IHS Markit reported a rise in the index to 55.3 in August from 53.3 in the prior month. The index reached a low of 32.6 earlier this year following the virus outbreak.

Rob Dobson, Director at IHS Markit acknowledge the recent strength but also warned that the recovery is driven “by the restarting of manufacturers’ operations and reopening of clients as COVID-19 restrictions continue to be relaxed”, according to companies included in the report.

Similar data will be released from the US later today and forecasts suggest the manufacturing sector there has also improved in August.

Later in the week, the US will report jobs data for August. This will likely be the highlight this week in terms of market-moving data. Analysts expect the pace of new jobs to have moderated while the unemployment rate is expected to improve to 9.8%.

Technical Analysis

GBPUSD 1-Hour Chart

The British pound is the second strongest major currency in the early day and dips in the pair have generally been shallow since the pair crossed above the 1.3400 handle.

The same level is viewed as the first level of support for the pair. A rising trend channel is encompassing recent price action and the lower boundary of it currently carries confluence with the 1.3400 level.

A potential near-term upside target is seen at 1.3515 which marks the spike high from last December.

The US dollar index (DXY) was last seen testing its 100-month moving average, an indicator it has not tested since 2014. There is also support from the 76.4% Fibonnaci level measured from the low posted in 2018 to the high printed earlier this year.

Bottom Line

  • GBP/USD continues to gain as the dollar remains under steady pressure.
  • The US dollar index is testing a confluence of support that can be best seen on a monthly chart.

For a look at all of today’s economic events, check out our economic calendar.