GBP/USD Rally Unwinds But Not Likely Over05 March, 2019 by Aayush Jindal in Market Analysis
- The British Pound surged above 1.3250 before sellers appeared near 1.3350 against the US Dollar.
- A major declining channel is in place with resistance near 1.3240 on the 4-hours chart of GBP/USD.
- The UK Construction PMI declined from 50.6 to 49.5 in Feb 2019.
- The UK Services PMI for Feb 2019 will be released today, which could decline from 50.1 to 49.9.
GBPUSD Technical Analysis
After forming a strong support above 1.2980, the British Pound started an uptrend above the 1.3200 resistance against the US Dollar. The GBP/USD pair climbed above 1.3300 before topping near the 1.3350 level.
Looking at the 4-hours chart, the pair traded as high as 1.3350 and later started a significant downside correction. It broke the 1.3250 support level and the 38.2% Fib retracement level of the last wave from the 1.2968 low to 1.3350 high.
However, there are many supports on the downside near the 1.3150 level and the 50% Fib retracement level of the last wave from the 1.2968 low to 1.3350 high. Below 1.3150, the pair could decline towards the 1.3090 support (a key pivot area).
At the outset, there is a major declining channel is in place with resistance near 1.3240 on the same chart. A break above the channel resistance and 1.3250 will most likely start a fresh upward move towards the 1.3300 or 1.3350 level.
Fundamentally, the UK Construction PMI report for Feb 2018 was released recently. The market was looking for a minor decline from the last reading of 50.6 to 50.3.
The result was disappointing as there was a sharp decline to 49.5 and the UK Construction PMI posted contraction for the first time in 11 months, led by commercial and civil engineering work.
The report added that:
The drop in construction work was led by reductions in commercial building and civil engineering activity. A soft patch for new orders so far in 2019 meant that job creation remained subdued in February.
The result weighed on GBP/USD, resulting in bearish moves. Going forward, today’s Services PMI reading and BOE’s Governor Mark Carney Speech could impact the market sentiment for the cable in the near term.
Economic Releases to Watch Today
- Germany’s Services PMI for Feb 2019 – Forecast 55.1, versus 55.1 previous.
- Euro Zone Services PMI for Feb 2019 – Forecast 52.3, versus 52.3 previous.
- UK Services PMI for Feb 2019 – Forecast 49.9, versus 50.1 previous.
- US ISM Non-Manufacturing Index for Feb 2019 – Forecast 57.2, versus 56.7 previous
- BOE’s Governor Mark Carney Speech.