The GBP/USD pair snapped the 6-day winning streak on Tuesday by closing at 1.4211. The spot clocked a daily low of 1.4173 in the NY session and a high of 1.4275 in Europe. Sterling’s decline could be attributed to China-led risk-off in the equities and (dovish) comments from BOE’s Weale, who said rates could be cut or QE could be restarted if required. Meanwhile, Carney’s refused to provide full analysis of Brexit, but did mention a possibility of slide in Pound and rise in (imported) inflation if Brits vote to leave. The pair dipped in Asia today and currently trades around 1.4184 levels.
Eyes Industrial production figure
UK industrial production numbers are scheduled for release today. In annualized terms, the production is seen rising 0.1%, while month-on-month figure is seen at 0.5%. Manufacturing production is seen coming in at 0.2% m/m and -0.7% y/y.
Data could beat estimates
The Markit/CIPS Purchasing Managers’ Index, beat economists’ expectations and rose to a three-month high of 52.9 in January, up from 52.1 in December. January’s rise in UK manufacturing production was driven by a rise in domestic orders.
The survey had also painted a more upbeat picture than official data for last year, which showed manufacturing output stagnated in the final quarter of 2015.
Consequently, odds of a better-than-expected manufacturing production figure are high. Given, the currency pair is finding support around 1.4178 (23.6% of 1.3835-1.4284), a better-than-expected UK data could trigger a rise to 1.4260 (rising trend line resistance).
Technicals – Strong resistance at 1.4330
Sterling’s failure to dip/sustain below 1.4178 (23.6% of 1.3835-1.4284) would open doors for a rally to 1.4260 (rising trend line resistance), which if penetrated would expose key hurdle at 1.4330 (23.6% of 1.5930-1.3835).
However, the currency pair needs to take out 1.4284 as it would signal failure of bearish price-RSI divergence noted yesterday on 4-hour chart. Only then, 1.4330 looks achievable.
On the other hand, a break below 1.4178 coupled with weak UK data could see the pair drift lower to next trend line support at 1.4128.
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