Two trades to watch: GBP/USD ahead of final Georgia result, Greggs slows sales decline

GBP/USD flirts with 1.3650 as the Democrats lead the Georgia runoffs & ahead of UK service sector PMIs Greggs looks to test key 1900 resistance after the rate of sales decline eases.

Charts (1)

GBP/USD rises as Blues lead in Georgia

GBP/USD is edging higher ahead of the December service sector PMI data and as investors await the final outcome of the Georgia run off election.

At the time of writing Democrat Warnock has won a seat and the votes are still being counted for the second seat. A blue sweep will pave an easier path for Joe Biden to push ahead with his political agenda of reversing Trump’s tax cuts, higher wages and tougher regulation.

UK service sector PMI data is expected to confirm 49.9 a slight contraction in December. However with the UK back in lockdown, this could deteriorate rapidly near term.

BoE Governor Andrew Baily is due to testify before the Treasury Select Committee.

In the US ADP Payroll report and the Fed minutes will be eyed.

Technical outlook

GBP/USD is flirting with $1.3650. It trades above its 50 & 20 sma bouncing off the latter when it eased back earlier in the session. The RSI also supports the bullish momentum as it sits above 50 but well below over bought territory suggesting that more upside could be on the cards.

A meaningful move of 1.3650 is required  in order to retest recent highs of 1.37. 
On the flip side a move below the 20 sma at 1.3620 could open the door to 50 sma at 1.3560 and 1.3535 January’s low. 

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Greggs jumps 4%, can it rise higher?

The bakery chain expects loss before tax for the year ended January 2nd to be up to £15 million, down from a record £108 million profit recorded a year earlier after Q4 sales plummeted 15% to £293 million.

However, Greggs had managed to slow the rate of sales decline as Q4 LFL sales averaged 81.1% of 2019’s an improvement from 71.2% in Q3. This suggests that Greggs is adapting to the pandemic challenges it faces, lifting the stock in early trade.

Technical outlook
Greggs has jumped over 4% higher on the open taking it over the upper band of a horizontal channel that it has traded in since early November. 
Greggs trades above its 20 & 50 day sma and above its ascending trendline dating back to early November signaling an established bullish trend. 

The RSI is in bullish territory above 50, but still comfortably below 70 suggesting that there could be more upside to come.

A meaningful break through the channel upper band at 1850 could see 1900/10 tested a level which the share price has failed to push above despite several attempts over the past 9 months. Beyond here 2000 the psychological level comes into focus

On the flip side support can be seen at 1800 horizontal support prior to 1750 20 sma and 1720 ascending trend line. A break below 50 sma 1650 is needed to for a deeper selloff.

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