GBP/USD extends recovery towards 1.3150 ahead of UK PMI
|- Weaker DXY and rising oil prices offer support to the pound.
- Recovery may be limited as UK construction PMI is expected to drop in June.
The GBP/USD pair is seen extending its recovery mode on the 1.31 handle, as we head towards the European opening bells, but the renewed upside may soon fade if the European equities turn risk-off.
GBP/USD: Eyes UK construction PMI
Also, looming Brexit concerns combined with a downbeat UK construction PMI report could keep the recovery attempts in check. The UK construction PMI is seen dropping to 52.0 in the month of June versus 52.5 seen in May.
With less than nine months left before the Brexit, there is a lack of clarity on the Customs deal while attention turns towards the Brexit impact studies, asked by the UK lawmakers to the BOE Governor Carney and Chancellor Philip ahead of a vote on the final divorce deal with the European Union.
Meanwhile, the latest leg higher in Cable from 1.3115 lows is mainly in response to a bearish undertone seen in the US dollar versus its main competitors, as the Treasury yield curve was the flattest since 2017. The USD index drops -0.15% to 94.89, having failed several attempts to take-out the 95 barrier.
Further, a jump in oil prices on the back of the Libyan supply disruption threat lift the sentiment around the higher-yielding/ risk currency, the GBP. The focus now remains on the UK PMI and US factory orders data for fresh trading impetus.
GBP/USD Technical Levels:
Karen Jones, Commerzbank’s Analyst, notes: “The divergence of the daily RSI implies a loss of downside momentum and we would allow for a corrective rebound near term towards the 20-day ma at 1.3259 and possibly the 1.3400/10 area. Should a recovery above the 20-day ma at 1.3259 be seen, this would allow for a corrective rebound into the 1.3440/1.3540 band and there is scope for the 1.3589 200 day ma (although this is less favored). Below 1.3040 would target the 50% retracement at 1.2918. Below 1.2918 would be treated as the breakdown point to 1.2580, the 61.8% retracement from 2016.”
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