Key Highlights
- GBP/USD is holding the key 1.3050 and 1.3000 support levels.
- A major bullish trend line is forming with support near 1.3090 on the 4-hours chart.
- The UK Services PMI increased from 49.0 to 50.0 in Dec 2019.
- The US ISM Non-Manufacturing Index could increase from 53.9 to 54.5 in Dec 2019.
GBP/USD Technical Analysis
After forming a swing high near 1.3284, GBP/USD started a downside correction. The British Pound traded below 1.3100 against the US Dollar, but the bulls were able protect the 1.3050 support.
Looking at the 4-hours chart, the pair traded below the 50% Fib retracement level of the upward move from the 1.2904 low to 1.3284 high.
However, the 1.3050 support area and the 200 simple moving average (green, 4-hours) acted as a strong buy zone. Besides, the 61.8% Fib retracement level of the upward move from the 1.2904 low to 1.3284 high also provided support.
Recently, the pair recovered above 1.3100 and 1.3120. However, there is a crucial resistance waiting on the upside near the 1.3200 area. A clear break above 1.3200 is likely to open the doors for a fresh rally towards 1.3280 and 1.3300.
Conversely, the pair might struggle to stay above 1.3100. More importantly, there is a major bullish trend line forming with support near 1.3090.
If there is a downside break below the trend line and 1.3050 support, there is a risk of a larger decline below 1.3000 in the near term.
Fundamentally, the UK PMI service for Dec 2019 was released by both the Chartered Institute of Purchasing & Supply and the Markit Economics. The market was looking for an increase from 49.0 to 49.2.
The actual result was positive, as the UK Services PMI increased to 50.0, helped by a rebound in new work (fastest pace since July 2019).
The report added:
UK service providers indicated that business activity was unchanged in December, following a marginal reduction in the previous month. The stabilisation of service sector output was helped by a return to improving order books, as signalled by the sharpest rise in new work since last July.
Overall, GBP/USD is likely to surpass the 1.3200 breakout resistance as long as it is above 1.3050. Besides, EUR/USD is showing positive signs above the 1.1150 support area.
Upcoming Economic Releases
- Euro Zone CPI for Dec 2019 (YoY, Preliminary) – Forecast +1.3%, versus +1.0% previous.
- US ISM Non-Manufacturing Index for Dec 2019 – Forecast 54.5, versus 53.9 previous.
