GBP/USD: Recovery to gain traction above 1.3530, awaits UK PMI

Fresh bids emerged near 1.3500 levels, which prompted a tepid recovery in GBP/USD during the Asian trades, with the bulls now look to regain the 1.3530 barrier heading into Europe.

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The spot accelerated downbeat UK construction PMI-led declines and tested the 1.35 handle, as broad-based USD recovery gained traction on the release of solid US ISM manufacturing PMI and once again after the FOMC minutes turned out more hawkish, indicating the Fed is still poised to hike interest rates several times this year.

Over the last hours, the recovery in the greenback appears to have faltered, aiding the renewed upside seen in Cable. Moreover, the risk-on rally seen in the Asian equities amid better Chinese services PMI data and higher oil prices also lifted the sentiment around the risk currency, the GBP.

However, markets do not rule a fresh round of selling below 1.3500 levels should the UK services PMI data disappoint, especially after both the UK manufacturing PMI and construction PMI data showed dismal results.  

Valeria Bednarik, Chief Analyst at FXStreet noted: “The UK will release its November money figures this Thursday, alongside with the December Markit Services PMI. This last is expected at 53.8 and will have a larger influence on prices that money data, as another miss will likely send the pair to fresh weekly lows.” 

GBP/USD Preferred Strategy

Bednarik added: “The 4 hours chart shows that it is poised to extend its decline on a break below the mentioned daily low, as its developing below its 20 SMA that anyway maintains a bullish slope, while technical indicators are breaking through their mid-lines, with limited bearish strength. A recovery beyond 1.3560, on the other hand, will take off the downward pressure, favoring a recovery toward the 1.3650 region. Support levels: 1.3495 1.3450 1.3410. Resistance levels: 1.3560 1.3610 1.3655.”