GBP/USD Drops Below 1.2850 as UK PMIs Disappoint
Fundamental Overview
As the UK Services PMI fell short of estimates with a reading of 51.1 in July, the GBP/USD is experiencing a downturn, falling below 1.2850. The manufacturing indicator also failed to meet expectations. Adding to the tension in the market is the imminent Fed rate decision, leaving traders on edge. Additionally, the preliminary US S&P Global PMIs are eagerly awaited.
GBP/USD witnessed a negative turn during the European session on Monday, breaking below 1.2810 to mark its lowest point in two weeks. The technical analysis for the pair suggests a bearish trend as traders await the release of the US S&P Global PMI surveys.
The UK’s S&P Global/CIPS Manufacturing PMI slipped from 46.5 in June to 45 in the flash estimate for July. Meanwhile, the Services PMI also displayed a loss of momentum in business activity within the services sector, dropping to 51.5 from 53.7.
According to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, who assessed the survey’s results, “the UK economy has come close to stalling in July which, combined with gloomy forward-looking indicators, reignites recession worries.”
Last week’s UK data revealed a definite weakening of inflation in June, resulting in the pound sterling struggling to find demand. Disappointing PMIs have dashed hopes for hawkish Bank of England (BoE) predictions to materialize and have hampered GBP/USD from gaining momentum on Monday morning.
The manufacturing sector is expected to continue to decline in the second half of the day, while the service sector is projected to show strong growth. Unless the PMI numbers turn out to be significantly worse than anticipated, staging a substantial recovery for GBP/USD might prove challenging.
GBP/USD Technical Analysis Daily Chart
Technical Overview
- GBP/USD is currently trading within a down channel.
- GBP/USD is positioned below all Simple Moving Averages (SMA).
- The Relative Strength Index (RSI) indicates bearishness, while the Stochastic oscillator suggests a neutral trend.
Resistance level: 1.2870 Immediate support level: 1.2823
How to Trade GBP/USD
After experiencing a rapid surge, the price of GBP/USD has now reversed and is currently on a downward trajectory. Presently, the GBP/USD pair is trading at a crucial support level; if this level breaks down, further declines can be expected.
GBP/USD is pointing towards a Sell signal.
Trade Suggestion
- Entry: 1.2804
- Take Profit: 1.2746
- Stop Loss: 1.2851
Conclusion
GBP/USD has faced a downward trend following disappointing UK PMI data. With the manufacturing sector expected to continue declining, and traders awaiting the Fed rate decision, the pair’s recovery may prove challenging. Technical indicators point towards a bearish outlook. Traders should be cautious and consider the suggested trade with an entry at 1.2804 and a stop loss at 1.2851. As the market dynamics evolve, it’s crucial to stay informed and monitor key economic indicators for GBP/USD trading decisions.