GBP/USD Hesitates, But Further Gains Seem Likely06 November, 2018 by Aayush Jindal in Market Analysis
- The British Pound recovered nicely and settled above the 1.2900 resistance against the US Dollar.
- There was a break above a significant bearish trend line with resistance at 1.2800 on the 4-hours chart of GBP/USD.
- The UK Services PMI in Oct 2018 declined from the last reading of 53.9 to 52.2.
- Today, the Euro Zone Services PMI for Oct 2018 will be released, which is forecasted to remain at 53.3.
GBPUSD Technical Analysis
The British Pound formed a solid support near 1.2690-1.2700 and recovered recently against the US Dollar. The GBP/USD pair broke the 1.2750, 1.2800, 1.2900 and 1.2960 resistance levels to move into a positive zone.
Looking at the 4-hours chart, the pair gained pace from the 1.2692 swing low and jumped above the 50% Fib retracement level of the last slide from the 1.3236 high to 1.2692 low.
More importantly, there was a break above a significant bearish trend line with resistance at 1.2800. The price even traded above the 1.3000 level and tested the 200 simple moving average (4-hours, green) plus the 61.8% Fib retracement level of the last slide from the 1.3236 high to 1.2692 low.
Presently, the pair is consolidating gains around the 1.3060-80 resistance zone. On the downside, there are many key support near the 1.2920 and 1.2900 levels, below which the price may move back into a bearish zone.
On the other hand, a successful close above 1.3080 and the 200 SMA could open the doors for more upsides towards the 1.3100 and 1.3150 levels in the near term.
Fundamentally, the UK Services PMI for Oct 2018 was released by both the Chartered Institute of Purchasing & Supply and the Markit Economics. The market was looking for a minor decline from the last reading of 53.9 to 53.3.
The actual result was lower than the forecast the UK Services PMI came in at 52.2, down from 53.9, which is the slowest rate of business activity expansion since March 2018.
The report added:
UK service providers signalled another increase in business activity during October, but the rate of expansion eased to its weakest since the snow-related soft patch seen in March. The loss of momentum largely reflected more cautious spending patterns among clients, as highlighted by the weakest upturn in new work since July 2016.
Overall, GBP/USD may correct lower, but as long as it is above 1.2900, it could bounce back.
Economic Releases to Watch Today
- Germany’s Services PMI for Oct 2018 – Forecast 53.6, versus 53.6 previous.
- Spanish Services PMI for Oct 2018 – Forecast 51.8, versus 52.5 previous.
- Euro Zone Services PMI for Oct 2018 – Forecast 53.3, versus 53.3 previous.
- US IBD/TIPP Economic Optimism Index for Nov 2018 – Forecast 57.6, versus 57.8 previous.