GBP/USD Showing Signs of Short Term Weakness

Key Highlights

  • The British Pound failed to settle above 1.2760 and recently declined against the US Dollar.
  • GBP/USD is likely following a declining pattern and it could test the 1.2600 support area.
  • The UK Manufacturing PMI in May 2019 declined further from 49.4 to 48.0.
  • The UK Construction PMI in May 2019 might increase from 48.6 to 49.3.

GBPUSD Technical Analysis

This past week, the British Pound made another attempt to climb above the 1.2760 and 1.2780 resistance levels. However, the GBP/USD pair failed to continue higher, topped at 1.2783, and recently declined below 1.2700.

GBPUSD Technical Analysis British Pound US Dollar

Looking at the 4-hours chart, the pair started a fresh decline from well above the 1.2750. It broke a few important supports near the 1.2720 level and the 100 simple moving average (red, 4-hours).

There was also a break below the last swing low near the 1.2642. It has opened the doors for more losses below the 1.2640 and 1.2620 levels.

The next major support is near the 1.2600 area plus the 1.236 Fib extension level of the last wave from the 1.2642 low to 1.2783 high. Once the pair revisits the 1.2600 support, it could start a fresh increase above the 1.2700 and 1.2720 levels.

On the upside, there are many important resistances near the 1.2700 level. There is also a connecting bearish trend line in place with resistance near 1.2695 on the same chart. Therefore, a successful close above the 1.2700 barrier is needed for a fresh increase in the near term.

Fundamentally, the UK Manufacturing PMI for May 2019 was released by both the Chartered Institute of Purchasing & Supply and the Markit Economics. The market was looking for a minor drop from the last reading of 59.4 to 49.2.

The actual result was disappointing, as the UK Manufacturing PMI declined to 48.0 and registered yet another contraction (lowest level since February 2013).

The report added:

The UK manufacturing sector continued to feel the reverberations of the unwinding of earlier pre-Brexit stockpiling activity during June. The already high stock levels at both manufacturers and their clients led to a scaling back of output and new order intakes, with demand from both domestic and export markets weakening.

Overall, GBP/USD seems to be struggling to gain bullish momentum. Therefore, it could slide towards the 1.2600 support before the bulls attempts another upward move.

Economic Releases to Watch Today

  • German Retail Sales for May 2019 (MoM) – Forecast 0.5%, versus -2.0% previous.
  • UK’s Construction PMI for May 2019 – Forecast 49.3, versus 48.6 previous.

Aayush Jindal

Aayush is a Senior Forex, Cryptocurrencies and Financial Market Strategist with a background in IT and financial markets. He specialises in market strategies and technical analysis, and has spent over a decade as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the currency, commodities, Bitcoin and Ethereum markets.

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