GBP/USD Forecast: Easing Deutsche Bank concerns limit Brexit timing-led declines, eyeing PMI prints

The British Pound opened with a weekly gap down after British Prime Minister Theresa May pledged to trigger Article 50 by the end of first quarter of 2017 and formally begin the process of ending UK's association with the European Union. However, easing concerns over the beleaguered German lender Deutsche Bank on reports that the US Department of Justice would seek a lower-than-previously reported penalty from the bank lifted investor risk appetite and help restrict further losses. The prevalent risk-on sentiment assisted the GBP/USD pair to rebound from September monthly lows support near 1.2915 level and also helped the EUR/USD pair to hold on to its sharp recovery witnessed late Friday.

Manufacturing PMI prints would be key highlight from the economic docket on Monday. The UK manufacturing PMI will take the centre stage during European session, while US ISM manufacturing PMI would turn out to be the key driver later during NA trading session. Consensus forecasts suggest that manufacturing activity in the UK remained in expansion territory in September, albeit at a slower pace than recorded in August. Meanwhile, the US ISM manufacturing PMI is expected to return back to growth trajectory after an unexpected contraction in August.

Technical outlook

GBP/USD

The pair’s rebound from 1.2915 support area now seems to confront immediate resistance near 1.2975 above which the recovery momentum could get extended towards testing a short-term descending trend-channel resistance near 1.3000 psychological mark. A convincing strength through the descending trend-channel resistance would negate any near-term bearish bias and lift the pair immediately towards 1.3050 intermediate resistance en-route 1.3100 handle.

Meanwhile on the downside, weakness below 1.2915 support might now accelerate the slide immediately below 1.2900 handle towards August monthly lows support near 1.2870. The downslide could further get extended towards testing the descending trend-channel support near 1.2750 region with 1.2800 round figure mark acting as intermediate support.

EUR/USD

The pair is now approaching a strong resistance near 1.1275-80 region, comprising of the top end of a short-term trading range and a short-term descending trend-line resistance. Hence, a strong buying interest above this important hurdle should pave way for an immediate up-move beyond 1.1300 handle towards its next major resistance near 1.1350-55 region.

On the flip side, weakness back below 1.1215-10 immediate support, leading to a subsequent drop below 1.1200 round figure mark, would reaffirm near-term range-bound trading action and hence, should to drag the pair back towards 100-day SMA support near 1.1180 region and eventually towards retesting the very important 200-day SMA support near 1.1160 region.