The GBP/USD managed to make back most of its BoE-related losses as we had anticipated that it might last Friday. It has found support from sell-side profit-taking after its sizeable drop last week and from weakness in the dollar amid uncertainty over the prospects for US tax cuts. On Friday, it got another boost from news UK Manufacturing Production climbed 0.7% month-over-month in September vs. +0.3% expected, though the gains were contained as construction output slumped by a larger-than-expected 1.6% on the same month. Next week will be a busy one for the cable as we will have inflation numbers from both sides of the pond. In addition, UK wages and retail sales from both countries are scheduled for release, too. It doesn’t end there as we will also have US industrial production, building permits and housing starts, among others.
So, the GBP/USD could be in for a rollercoaster ride next week after its BoE-related drop last week. Will the data cause it to move outside of its 6-week consolidation range? This week, it managed to hold above the bullish trend line, so the longer-term bullish trend has remained intact for the time being. However, the cable is still residing inside a short-term bearish channel. Thus, it is far too early for the bulls to start celebrating, especially ahead of the upcoming data releases from both nations. The top of this bear channel comes in around the 1.3240/5 area where we also have the 50-day moving average and a resistance level converging. Therefore, a clean break above here next week would be bullish, more so if the next resistance in the 1.3300/50 area also gives way. However, all bets would be off if the uptrend breaks down. Specifically, a move below 1.3080, which is the most recent short-term swing point, could clear the way for a deeper correction. Conservative traders may wish to wait for price to tip its hand before potentially trading in the direction of the break.
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