GBP/USD pair is trading weak around 1.4330 today ahead of the UK manufacturing PMI release. Cable rose to a high of 1.4427 levels yesterday before falling back to 1.4368 and extending losses in Asia today. The decline from 1.4427 could be blamed to a release of poll of polls which showed sentiment is slowly shifting in favor of Brexit. The immediate focus now is on the UK manufacturing PMI release, which will be followed by US average hourly earnings and non-farm payrolls figure. (Trading the average hourly earnings report (Gold and GBP/USD) - Macro Scan )
Weak PMI figure could spell trouble for Pound
Consensus estimate calls for an improvement in the PMI index to 51.2 from Feb’s figure of 50.8. The CBI total trends survey released on March 21st showed the manufacturing sector is still in recession. Factory output fell over the three months to March at the fastest pace since September 2009 due to weak demand from foreign customers and depressed demand at home.
The total orders balance improve to a three-month high of -14% in March after falling back to a four-month low of -17% in February from -15% in January and -7% in December. Though there was slight improvement, the figure stayed in the negative.
Hence, the PMI could print in line with the estimates. However, a possibility of a weaker-than-expected PMI cannot be ruled out and that could trigger a drop in the GBP/USD pair. On the contrary, a strong PMI figure could push Cable back to 1.44 levels.
Technicals – Losses seen below 1.4330
Sterling’s rally from last week’s low of 1.4057 to 1.4426 levels resulted in a loss of momentum owing to which prices drifted lower to near 1.4330 (23.6% of 1.5930-1.3835) levels today.
Acceptance below 1.4330 is unlikely on the hourly chart, given the daily RSI stays above 50.00. Nevertheless, a drop could expose the rising trend line support seen on the hourly chart at 1.4265.
Conversely, a rebound from 1.4330 would expose 1.4390-1.44 handle. A violation there could result in a re-test of 1.4426-1.4475 levels.
Bullish invalidation is seen only below 1.4284 levels.
Check out Non-farm payrolls report and its impact on EUR/USD and USD/JPY -Nonfarm Payrolls Forecast
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