|

GBP/USD corrects further from multi-week high, drops closer to 1.2200 on weaker UK PMIs

  • GBP/USD meets with aggressive supply on Friday and is pressured by a combination of factors.
  • The risk-off impulse boosts the safe-haven USD and triggers the initial leg of the intraday slide.
  • The disappointing release of the UK PMI weighs on the GBP and contributes to the downfall.

The GBP/USD pair comes under heavy selling pressure on the last day of the week and retreats further from its highest level since early February, around the 1.2340-1.2345 region touched on Thursday. The selling bias remains unabated through the first half of the European session and drags spot prices back closer to the 1.2200 mark in the last hour.

A fresh wave of the global risk-aversion trade - as depicted by a sharp intraday fall in the equity markets - assists the US Dollar (USD) to gain strong follow-through traction on Friday and build on the previous day's goodish rebound from a seven-week low. This, in turn, is seen as a key factor weighing heavily on the GBP/USD pair. The British Pound is further weighed down by the Bank of England Governor Andrew Bailey's dovish remarks and the disappointing release of the flash UK PMI prints for March.

In an interview with BBC on Friday, Bailey noted that there is evidence of encouraging progress on inflation and that companies should bear in mind that BoE forecasts inflation will fall. Furthermore, the S&P Global/CIPS UK Manufacturing PMI contracted further to 48.0 in March versus the 49.8 expected and the previous month's final reading of 49.3. Adding to this, the Preliminary UK Services Business Activity Index for March dropped to 52.8 from 53.5 in February and consensus estimates for a reading of 53.0.

With the latest leg down, the GBP/USD pair has now reversed a major part of its gains recorded over the past two sessions and has now moved well within the striking distance of the weekly low. Market participants now look forward to the US economic docket, featuring the release of Durable Goods Orders and the flash PMI prints for March. This, along with the broader risk sentiment, will influence the USD price dynamics and allow traders to grab short-term opportunities around the major.

Technical levels to watch

GBP/USD

Overview
Today last price1.2213
Today Daily Change-0.0075
Today Daily Change %-0.61
Today daily open1.2288
 
Trends
Daily SMA201.2071
Daily SMA501.2148
Daily SMA1001.2084
Daily SMA2001.1893
 
Levels
Previous Daily High1.2344
Previous Daily Low1.2262
Previous Weekly High1.2204
Previous Weekly Low1.201
Previous Monthly High1.2402
Previous Monthly Low1.1915
Daily Fibonacci 38.2%1.2312
Daily Fibonacci 61.8%1.2293
Daily Pivot Point S11.2252
Daily Pivot Point S21.2216
Daily Pivot Point S31.217
Daily Pivot Point R11.2334
Daily Pivot Point R21.2379
Daily Pivot Point R31.2415

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

More from Haresh Menghani
Share:

Editor's Picks

AUD/USD sits at three-week highs above 0.7000 on hawkish RBA-speak

AUD/USD holds a positive bias for the fourth straight day, trading above 0.7000 in the Asian session on Wednesday and at three-week highs. RBA Deputy Governor Andrew Hauser's hawkish remarks and inflation concerns underpin the pair. However, the upside appears capped as the US Dollar attracts some buyers amid looming US-Iran uncertainty.

USD/JPY remains confined in a familiar range below 158.50

USD/JPY sees some dip-buying in the Asian session on Wednesday, though it remains confined within a multi-week range near 158.50 as the uncertainty over the timing of the next BoJ rate hike keeps Japanese Yen bulls on the defensive. Meanwhile, hawkish Fed expectations, bolstered by inflation risks stemming from volatile oil prices, underpin the US Dollar. However, looming intervention fears could limit JPY losses and cap the currency pair.

Gold bounces off weekly low; Fed hike bets and modest USD recovery keep upside limited

Gold recovers slightly from the weekly low, around the $4,100 neighborhood, though the upside potential seems limited amid a bearish fundamental backdrop. Inflation risks stemming from volatile oil prices underpin prospects for further policy tightening by the US Federal Reserve. Furthermore, a modest US Dollar recovery from a near three-week low could contribute to capping bullion.

Zcash's bullish reversal eyes $1,698 peak on NU7 upgrade
Zcash (ZEC) shows signs of bullish recovery above $1,200 on Wednesday, following a 9% rebound the previous day linked to the upcoming NU7 upgrade. Blockworks released a Zcash holders report on Tuesday, highlighting steady network growth. The technical outlook for ZEC is bullish, with bulls eyeing an extended rally toward $1,698.
US – Midterm update: Pre-election tail risk scenarios
With two weeks until the US midterm elections on 3 November, early voting has already opened in more than 40 states. Prediction markets are broadly unchanged since we published our Midterm update, 13 October. The prediction market Polymarket continues to see Democrats winning both chambers as the most likely outcome, with a 62.5% probability.
The US Dollar fell. Gold didn't rally. That tells you everything
Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.