Chart of the Day GBPUSD

GBPUSD: GBP saw a seven month high against the USD amid market speculation that UK PM Boris Johnson’s Conservative Party will win a clear majority at the 12 December polls and boost his Brexit agreement chances with the lawmakers. Decline in UK services activity amidst political uncertainty: The final reading of the IHS Markit/CIPS UK Services PMI was revised upwards from 48.6 to 49.3 in November (Oct: 50.0), but still below the no-change level in the previous month to indicate a contraction in UK services activity. The decline reflects cautious business and consumer spending stemming from the current political uncertainty leading up to next week’s elections. 

USD: US private sector added fewer jobs than expected: The ADP National Employment Report showed that US private sector added a mere 67k jobs in November (Oct: 121k revised), way below analysts’ estimates of 135k. All job gains came from the services industry which saw a payroll gain of 85k, that was partly offset by the 18k reduction in the goods producing sector of which mining, construction and manufacturing each reported 6k of job losses.  US ISM indicates slower growth in services activity: The ISM Non Manufacturing Index slipped to 53.9 in November (Oct: 54.7), reflecting smaller output/production last month. Nonetheless details suggest that overall services sector remains healthy, supported by solid gains in new orders, employment as well as new exports orders. Meanwhile, the final reading of the IHS Markit US Services PMI was unrevised at 51.6 in November (Oct: 50.6), above the previous month’s print to suggest a faster upturn in the services sector

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From a technical and trading perspective, as anticipated in my Daily Market Outlook GBPUSD has been grinding higher and looks to be on track to test my 1.32 target. As price tests offers and stops above 1.32 there is the potential for a profit taking pause to develop. Momentum divergence and overbought conditions could provide the catalyst for a corrective phase to see price pull back to retest the 1.30 breakout area as support before the next leg of upside may develop to test offers and stops towards 1.34.

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