The USD index made an unsuccessful attempt to extend yesterday’s advance
British pound struggles for direction on Friday even as the dollar came under widespread selling pressure amid upbeat investor sentiment and mixed-to-positive economic data out of Europe. Earlier this week, GBPUSD peaked at 1.3175 and has retreated below 1.31 since then, trading with a marginal bearish bias during the European hours on Friday.
Despite the current downside correction, the pair remains in the green on the weekly charts while traders hope for fresh positive Brexit-related headlines. Today, Chief EU Negotiator Michel Barnier provides his weekly assessment of the talks. If he points to a lack of meaningful progress despite intensifying negotiations, the pound could edge lower in the short term. However, downside risks should be limited as the greenback is on the defensive nearly across the board.
On the data front, Markit’s UK preliminary PMIs for October were mixed. The manufacturing index came in at 53.3, marginally above estimates, while services PMI slipped to 52.3, missing expectations.
As for the dollar itself, the USD index made an unsuccessful attempt to extend yesterday’s advance, with the 6-month resistance line around 93.40 keeping capping gains. Earlier recovery attempts were capped by the reports on some further progress in stimulus talks and upbeat corporate earnings that helped to lift sentiment in the global financial markets.
As of writing, GBPUSD was changing hands around 1.3165, nearly unchanged on the day while deriving intraday support from the 1.3050 area. As long as the pair stays above the 1.30 psychological handle, downside risks remain limited. On the upside, the sterling needs to regain the 1.31 barrier in order to retest the above-mentioned early-September highs registered on Wednesday. The daily RSI looks directionless, suggesting the current consolidation could continue in the short term. In a wider picture, the pair looks buoyed as long as the prices stay above the 20-weekly moving average, at 1.2850 today.