Key Highlights
- GBP/USD started a fresh upward move after trading as low as 1.2673.
- It broke a major bearish trend line with resistance near 1.2930 on the 4-hours chart.
- The UK Services PMI increased from 55.1 to 56.1 in Sep 2020.
- The US Services PMI remained stable at 54.6 in Sep 2020.
GBP/USD Technical Analysis
After a major decline, the British Pound found support just below the 1.2700 level against the US Dollar. GBP/USD traded as low as 1.2673 and recently started a fresh upward move.
Looking at the 4-hours chart, the pair was able to recover above the 1.2750 and 1.2800 resistance levels. There was a break above the 23.6% Fib retracement level of the downward move from the 1.3482 high (formed on 1st Sep 2020) to 1.2673 low.
There was also a close above the 1.2920 resistance and the 100 simple moving average (red, 4-hours). More importantly, there was a break above a major bearish trend line with resistance near 1.2930 on the same chart.
The pair is now facing a couple of hurdles near 1.3000, 1.3020, and the 200 simple moving average (green, 4-hours). The next major resistance is near the 1.3080 level or the 50% Fib retracement level of the downward move from the 1.3482 high (formed on 1st Sep 2020) to 1.2673 low.
A successful break above the 1.3050 level and follow through move above 1.3080 could open the doors for more upsides towards 1.3200 or even 1.3250.
Conversely, the pair could decline below the 1.2920 support. The next major support is now forming near 1.2840, below which the pair could resume its decline towards 1.2700.
Fundamentally, the UK Services PMI for Sep 2020 was released yesterday by both the Chartered Institute of Purchasing & Supply and the Markit Economics. The market was looking for a decline in the PMI from 55.1 to 55.0.
The actual result was better than the forecast, as the UK Services PMI increased from 55.1 to 56.1 in Sep 2020, which is the third successive month of growths.
The report added:
The UK service sector continued its recent recovery from the sharp downturn related to the start of the coronavirus disease 2019 (COVID-19) pandemic earlier in 2020, with business activity rising for a third successive month.
Overall, GBP/USD is showing positive signs, but it must remain stable above 1.3000 for more gains. Similarly, EUR/USD could accelerate higher once it closes above 1.1800.
Upcoming Economic Releases
- US Trade Balance August 2020 – Forecast $-66.2B, versus $-63.6B previous.
- Fed’s Chair Powell speech.
