GBP/USD Violates Upward Channel – Bullish Bias Continues!

The GBP/USD pair closed at 1.38523, after placing a high of 1.38622, and a low of 1.37755. The GBP/USD pair managed to recover a major part of its losses, ending its day with a bullish candle around the 1.3800 mark on Friday, amid the strength of the British Pound. A better than expected UK GDP report on the day had an almost muted reaction; however, the British Pound remained supportive, due to the growing optimism that the UK was leading in terms of the coronavirus vaccination rollout, which could facilitate an earlier easing of lockdown restrictions. As a result, hopes of recovery increased, supporting the local currency, the Pound Sterling, and lifting the GBP/USD pair on Friday.

On the other hand, the US dollar trimmed some of its intraday gains due to a modest rebound in the US equity futures. The US equity and bond markets reacted strongly to the prospects of the delivery of US President Joe Biden’s proposed $ 1.9 trillion coronavirus stimulus package.

US House Speaker Nancy Pelosi said on Friday that her chamber was preparing the Democrat proposal for a $ 15 minimum wage, as part of the coronavirus aid package to send to the Senate. She added that 27 million people would get a raise, of whom 70% will be women. The Congressional Budget Office said earlier this week that the measure could cost about 1.4 million jobs and lift only 900,000 out of poverty.
This kept the US dollar under pressure and lifted the GBP/USD pair higher.

On the data front, at 12:00 GMT, the Prelim GDP for the quarter was released, indicating a rise to 1.0%, against the expected 0.5%, which supported the British Pound and added gains to the GBP/USD pair. The Construction Output from Britain dropped to -2.9%, against the expected 0.5% in December, weighing on the British Pound and capping any further upside in the GBP/USD pair. The GDP for December rose to 1.2%, against the projected 1.0%, lending support to the Sterling. The Goods Trade Balance showed a deficit of -14.3B, against the projected -15.3B, boosting the British Pound and adding further to the gains in the GBP/USD pair.
The Index of Services rose to 0.6%, against the forecast of 0.0%, supporting the British Pound for the quarter, and pushing the GBP/USD pair higher. For the quarter, the Prelim Business Investment rose to 1.3%, against the projected -1.4%, and supported the British Pound, pushing the pair higher. At 12:03 GMT, the Industrial production for December declined to 0.2%, against the expected 0.5%, weighing on the British Pound and limiting any further gains in the GBP/USD pair. In December, Manufacturing Production also declined, falling to 0.3%, against the expected 0.7%, which put pressure on the British Pound. At 17:56 GMT, the NIESR GDP Estimate came in at -2.5%, against the previous 1.0%.

From the US side, at 20:00 GMT, the Prelim UoM Consumer Sentiment was released, showing a drop to 76.2, against the anticipated 80.8, which weighed on the US dollar and added further to the gains in the GBP/USD pair. The Prelim UoM Inflation Expectations for February came in at 3.3%, against the anticipated 3.0%.

Meanwhile, the government of the United Kingdom said that it had met its target of offering the first shot of coronavirus vaccine to almost 15 million people in four priority groups, including the most vulnerable people in England. The goal of delivering the first vaccine shot to people in England who are over the age of 50, by mid-February, has been achieved. This successful handling of the UK government’s vaccination program has been praised by many countries, and it has lifted hopes for faster economic recovery.
After this news, the hopes for a quick easing of restrictions by the UK government increased, as the COVID Recovery Group sent a letter to the Prime Minister stating that there was no longer any justification for restrictions to remain in place, as people over the age of 50 have been offered the coronavirus vaccine. This also supported the British Pound and lifted the GBP/USD pair higher. Furthermore, Prime Minister Boris Johnson will present a roadmap for the way out of lockdown on February 22, as his own party is urging him to ensure that schools reopen in early March as promised. Johnson’s speech will receive the full attention of GBP traders, and it will keep the British Pound supported.

Daily Technical Levels:
Support               Resistance
1.3790                 1.3850
1.3765                 1.3885
1.3729                 1.3910
Pivot Point:       1.3825

The GBP/USD pair is trading with a bullish bias at the 1.3845 level, and it’s been stuck in a narrow trading range between 1.3864 and 1.3779. In the week ahead, all eyes will remain on an upward channel, which is keeping the Cable bullish on the 8-hour timeframe. A bullish crossover at 1.3864 could extend the buying trend until the 1.3960 level, while the support remains around 1.3690. A bullish bias dominates. Let’s consider buying over the 1.3864 level. Good luck!