GBP/USD Nosedives Below Key Support, More Losses Likely03 January, 2019 by Aayush Jindal in Market Analysis
- The British Pound formed a top near 1.2815 and later declined sharply against the US Dollar.
- There was a break below a major ascending channel with support at 1.2650 on the 4-hours chart of GBP/USD.
- The US Manufacturing PMI in Dec 2018 declined from the last revised reading of 55.3 to 53.8.
- Today in the US, the ADP Employment Change figure for Dec 2018 will be released, which is forecasted to change 178K.
GBPUSD Technical Analysis
After a solid upward move, the British Pound found a strong resistance near 1.2800 against the US Dollar. The GBP/USD pair started a downside move and declined heavily below the 1.2600 support.
Looking at the 4-hours chart, the pair formed a top near the 1.2825 level and later started a sharp downside move. It broke the 1.2700 support and settled below the 100 simple moving average (red, 4-hours).
There was even a break below the 1.2600 and 1.2450 support levels. Moreover, there was a break below a major ascending channel with support at 1.2650 on the 4-hours chart of GBP/USD. A new yearly low was formed at 1.2391 and later the pair started an upside correction.
It moved above the 1.2500 resistance and the 23.6% Fib retracement level of the last decline from the 1.2814 high to 1.2391 low.
However, there are many hurdles for buyers near 1.2600, 1.2620, 100 SMA, and the 50% Fib retracement level of the last decline from the 1.2814 high to 1.2391 low. Therefore, upsides are likely to be capped near the 1.2600-1.2620 zone.
On the downside, an initial support is at 1.2520, below which the pair may continue to move down towards the 1.2500 and 1.2450 levels.
Recently in the US, the Markit Manufacturing PMI for Dec 2018 was released. The market was looking for a rise from 53.9 to 54.2.
The result was disappointing since there was a decline in the PMI to 53.8 in Dec 2018. Moreover, the last reading was revised up to 55.3, which means the net decline was a lot more.
Overall, GBP/USD and EUR/USD may correct higher in the short term, but upsides are likely to be capped.
Economic Releases to Watch Today
- US ISM Manufacturing Index for Dec 2018 – Forecast 57.9, versus 59.3 previous.
- US Initial Jobless Claims – Forecast 220K, versus 216K previous.
- US ADP Employment Change Dec 2018 – Forecast 178K, versus 179K previous.