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GBP/USD: Remains Under Heavy Pressure

ByNicky Ong
Published 02/04/2013, 01:49 AM
Updated 07/09/2023, 06:31 AM

GBP/USD ended the week lower after a much needed pullback in early week trade was soon reversed in favour of the longer term trend as Manufacturing data reflected an economy slipping back into another recession.

The slide in cable was an exception to the European trend as the pair hit a five-month low of 1.5716, and remains under heavy pressure as investors worry over the potential triple-dip recession risk. Recent GDP data coupled with dovish rhetoric from incoming BOE Governor Carney gave sterling little chance of forming anything more than relief pullback in the longer term downtrend.

Price action suggests a break through Friday’s lows will bring a swift move to the 1.5648 key level, and ultimately the 1.5600 handle.

The BOE Rate Decision on Thursday is the major release this week, although much like the ECB, the BOE are not expected to alter interest rates or asset purchases. The slowdown in the U.K economy is widely publicised, but I can’t see the central bank moving on monetary policy until they have a clearer assessment of the economy.

Services PMI is expected to come in below 50.0 for a 2nd straight month confirming the downtrend in this sector, whilst Manufacturing Production (on Thursday) should pop up after last month’s contraction.
<span class=GBP/USD" title="GBP/USD" width="524" height="334">
• GBP/USD has been unable to break above the key 1.6300 level since August 2011. Remains a major resistance level.

• Decline through support at 1.5820 triggered the bearish price action mentioned in last week’s report.

• A break through Friday’s lows brings the 1.5648 key level and 1.5600 handle into play.

• Previous support now becomes resistance for pullbacks (1.5910, 1.5971, 1.5820, 1.5767)

• Bearish bias with rallies sold at key levels

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