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GBP/USD Turns South, Could Test 1.2800 Support

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Technical analysis of Forex market

Key Highlights

  • The British Pound faced a strong resistance near 1.3050 and declined against the US Dollar.
  • There was a break below a major ascending channel with support at 1.2930 on the 4-hour chart of GBP/USD.
  • The UK Manufacturing PMI in August 2018 declined from the last revised reading of 53.8 to 52.8.
  • Today, the UK Construction PMI for August 2018 will be released, which is forecasted to decline from 55.8 to 54.9.

GBPUSD Technical Analysis

The British Pound traded higher nicely this past week above the 1.2920 resistance against the US Dollar. The GBP/USD pair traded as high as 1.3043 before facing a strong resistance.

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Looking at the 4-hours chart, the pair started a downside move and broke the 1.2950-60 support area. There was also a break below the 23.6% Fib retracement level of the last leg from the 1.2661 low to 1.3043 high.

More importantly, there was a close below a major ascending channel with support at 1.2930 and the 200 simple moving average (green, 4-hours). There are clear bearish moves visible on the chart and if the pair slides below 1.2840 support and the 100 simple moving average (red, 4-hours), it could test the 1.2800 support.

An intermediate support is the 61.8% Fib retracement level of the last leg from the 1.2661 low to 1.3043 high 1.2807. On the upside, the pair is facing the key resistance at 1.2940-50 and the 200 SMA. Only a close back above 1.2950 may perhaps decrease selling pressure on cable in the near term.

Fundamentally, the UK Manufacturing PMI for August 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 54.0 to 53.8.

The actual result below the market forecast as the PMI declined to 52.8. Moreover, the last reading was revised down from 54.0 to 53.8. Moreover, as per the report, job creation slowed to near-stagnation.

The GBP/USD pair remained under pressure and if sellers remain in control, the pair could trade towards 1.2800 in the near term.

Economic Releases to Watch Today

  • UK Construction PMI for August 2018 – Forecast 54.9, versus 55.8 previous.
  • US Manufacturing PMI for August 2018 – Forecast 54.5, versus 54.5 previous.
  • US ISM Manufacturing Index for August 2018 – Forecast 57.7, versus 58.1 previous.