After fall in August British currency began to grow again. The main catalyst of the recent fall of the pair was the growth of the US currency due to favorable fundamental background. The additional factor was the negative main UK economy sectors data and the unwillingness of the Bank of England to tighten the monetary policy in the nearest future.
On the other hand, the representatives of the BoE began to offer to increase the rate more often. It’s possible that the investors are waiting for it. In the end of August the pair stopped at the key support level and the lower border of the long term upward channel, after which it got the additional demand and began to grow. In addition, in the beginning of the month USD decreased due to the negative US employment market data.
Today, despite the poor Markit Services PMI data publication, pound is strengthening.
Support and resistance
In the middle term the main catalyst of the pair’s growth can become the investors’ anticipation of the BoE interest rate rise against the increase of UK economy growth rate. US dollar position is unfavorable, as Fed decided to postpone the further tightening of the monetary policy and interest rate rise, in addition, the fundamental background cannot support the USD. In the middle term the strengthening of the investors’ interest in the UK currency is expected, and the pair can grow to the levels of 1.3100, 1.3125. Favorable Industrial Production and Manufacturing production data can strengthen the upward dynamics. Technically the pair stays in the long term upward trend, but the dynamics is unlikely be so significant, that the highs will be renewed in the middle term. Most likely, the slight upward wave with long downward corrections will form.
Support levels: 1.2930, 1.2835, 1.2805, 1.2775, 1.2755, 1.2700, 1.2590.
Resistance levels: 1.3000, 1.3125, 1.3200, 1.3270, 1.3350, 1.3410.
Long positions can be opened at the current level with the target at 1.3125, 1.3200 and stop loss at 1.2830.