GBP is rising at the beginning of the new week as investors take heart from recent better-than-expected data out of the UK.
The pound to dollar exchange rate was seen trading at 1.3117 on the inter-bank markets in afternoon trade on Monday.
We see international payment rates from banks being offered in the 1.2770 to 1.2678 region while independent FX providers were quoting closer to the market at 1.3020 to 1.2928.
Data out last week showed an eye-opening 1.4% rise in Retail Sales in July, which put pay to pessimistic expectations of only a 0.1% rise, after shoppers refused to be cowed by Brexit fear.
Employment data for Wednesday also showed an unexpected rise, whilst inflation figures for July, indicating no cause for concern over runaway inflation in the wake of the post-referendum falling pound.
EUR/GBP continued its gentle decline after peaking last Monday (Aug 16), however, technically speaking the fall looks unconvincing and eventually the dominant up-trend from the May lows will probably take over and push the pair higher again, with a break above 0.8693 leading to a probable move up to the same level of the Monday highs at 0.8726.
Looked at through the lens of Elliot Wave analysis, the pair is probably finishing off its final wave 5 of the larger move which began at the May lows.
Zooming in and it is possible to see that the pair could be forming a sub-component wave (4) within this final wave 5.
Once sub-wave (4) has completed it will probably move higher in a final sub-wave (5) to end the larger 5.
On Tuesday the pair may be impacted by Eurozone PMI data, which will shine a light on the health of the Eurozone economy in the wake of Brexit.
Turning now to the chart of the pound to dollar pair and we see that it is probably forming a base of some sort, which may well be a ‘double bottom’ pattern as indicated on the chart.
If sterling strengthens from here and moves above the 1.3200 level, it should rise up to 1.3300.
A break above the neckline at about 1.3400, would lead to a stronger move higher to 1.3600.