GBP/USD steady around 1.3200, consolidates gains

Cable is up for the second day in a row, supported by the decline of the US dollar in the market and also by some stabilization of the pound after being under pressure for weeks. 

GBP/USD claimed from 1.3140 and peaked at 1.3225, the highest levels since last Thursday. From the top pulled back modestly and near the end of the session, it was hovering around 1.3200, consolidating gains. From Friday’s low it has risen almost 200 pips. 

Today’s economic data from the UK, showed that industrial production expanded 1.6% y/y in August, above market expectations of 0.8%. In another report, the GDP estimate released by the National Institute of Economic and Social Research came in at 0.4%, unchanged. UK data offered some support to the pound. 

The US dollar weakened in the market amid a rally in US bonds. The 10-year yield moved away from monthly highs and dropped to 2.32%. Tomorrow the key report will come from the US: the minutes of the latest FOMC meeting. 

UK: GDP growth of 0.4% in third quarter of 2017 - NIESR

Regarding Brexit, the fifth round of negotiations is taking place. UK PM May said that she will not be kicking out European Union citizens and showed optimism regarding an agreement on the subject.

PM May says close to an agreement on EU citizens

Technical outlook 

In the short-term the pair is moving with an upside bias, correcting higher after the sharp slide from above 1.3600. The area above 1.3000 capped the slide and the bearish pressure eased. 

The up-move that started on Friday, pushed the pair close to the 20-day moving average the stands at 1.3260. It if rises and holds on top, the pound would gain support to continue north. 

On the flip side, a slide back under 1.3140/50, a support area and also the 20 SMA in four hours chart, is likely to put GBP/USD back under pressure. Below, the area around 1.3000 and 1.3040 is the key short-term support.