Key Highlights
- GBP/USD started a strong increase above the 1.2350 resistance zone.
- There was a break above a crucial bearish trend line at 1.2335 on the 4-hours chart.
- The UK Manufacturing PMI increased from 40.6 to 40.7 in May 2020.
- The US ISM Manufacturing PMI increased from 41.5 to 43.1 in May 2020.
GBP/USD Technical Analysis
In the past few days, the British Pound broke a few key hurdles near 1.2300 against the US Dollar. As a result, GBP/USD moved into a positive zone and it even climbed above 1.2400.
Looking at the 4-hours chart, the pair settled nicely above the 1.2350 resistance zone, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).
Moreover, there was a break above a crucial bearish trend line at 1.2335 on the same chart. The pair is now trading above the 61.8% Fib retracement level of the key decline from the 1.2643 high to 1.2076 low.
It seems like the 1.2500 zone is acting as a resistance. The 76.4% Fib retracement level of the key decline from the 1.2643 high to 1.2076 low is also preventing more upsides.
Therefore, there could be a minor downside correction below 1.2480. The first key support is near the 1.2420 level, below which the pair might slide towards the 1.2350 support or the 200 SMA (green).
On the upside, an initial resistance is near the 1.2500 level. A clear break above 1.2500 might lead the pair towards the 1.2580 resistance or the 1.2643 high in the coming days.
Fundamentally, the UK Manufacturing Purchasing Managers Index (PMI) for May 2020 was released by both the Chartered Institute of Purchasing & Supply and the Markit Economics. The market was looking for a minor increase from 40.6 to 40.7.
The result was in line with the forecast, as the UK Manufacturing PMI came in at 40.7, but it is still well below the 50.0 level.
The report added:
The rapid downturn in the UK manufacturing sector continued during May, as the public lockdowns, company shutdowns and social distancing measures mandated to combat the spread of coronavirus disease 2019 (COVID-19) caused further disruption.
Overall, GBP/USD might correct lower, but dips could find bids near 1.2420 or 1.2350. Similarly, EUR/USD is showing positive signs above the 1.1100 level.
Upcoming Economic Releases
- Swiss Retail Sales April 2020 (YoY) – Forecast -4.8%, versus -5.6% previous.
- ISM-NY Business Conditions Index May 2020 – Forecast 4.5, versus 4.3 previous.
