GBP/USD Correcting Lower Towards Key Support05 February, 2019 by Aayush Jindal in Market Analysis
- The British Pound started a major downside correction from the 1.3217 high against the US Dollar.
- There is a key declining channel formed with resistance at 1.3120 on the 4-hours chart of GBP/USD.
- The UK Construction PMI in Jan 2019 declined from 52.8 to 50.6.
- The UK Services PMI for Jan 2019 will be released today, which could decline from 51.2 to 51.0.
GBPUSD Technical Analysis
After a massive rally, the British Pound found sellers above the 1.3200 level against the US Dollar. The GBP/USD pair topped near 1.3217 and later started a substantial downside correction.
Looking at the 4-hours chart, the pair declined below the 1.3180 and 1.3150 support levels to start a downside correction. Sellers even pushed the price below the 38.2% Fib retracement level of the last wave from the 1.2830 swing low to 1.3217 high.
However, there are many key supports on the downside, starting with the 1.3020 level and the 50% Fib retracement level of the last wave from the 1.2830 swing low to 1.3217 high.
The main support is near the 1.3000 handle and the 100 (red) simple moving average (4-hours). If there is a daily close below 1.3000, the pair could accelerate losses towards the 1.2920 support level.
On the upside, there is a strong resistance formed near 1.3120 and a declining channel on the same chart. A successful break above the channel resistance will most likely open the doors for a fresh rise towards the 1.3200 and 1.3220 levels.
Fundamentally, the UK Construction PMI for Jan 2019 was released recently by the Chartered Institute of Purchasing & Supply and Markit Economics. The market was looking for a minor drop in the PMI from 52.8 to 52.4.
However, the result was disappointing as the UK Construction PMI dropped to 50.6 and just managed to stay in the expansion zone. The report stated:
January data pointed to a loss of momentum for the UK construction sector, with business activity growth easing to its weakest for ten months. New orders increased only marginally at the start of 2019, which contributed to the slowest expansion of employment numbers for two-and-a-half years.
Overall, the GBP/USD pair might correct further in the short term, but the 1.3000 support area could play an important role in the next move.
Economic Releases to Watch Today
- Germany’s Services PMI for Jan 2019 – Forecast 53.1, versus 53.1 previous.
- Euro Zone Services PMI for Jan 2019 – Forecast 50.8, versus 50.8 previous.
- UK Services PMI for Jan 2019 – Forecast 51.0, versus 51.6 previous.
- US Services PMI for Jan 2019 – Forecast 54.2, versus 54.2 previous.
- US ISM Non-Manufacturing Index for Jan 2019 – Forecast 57.1, versus 58.0 previous.