- UK manufacturing PMI drops to more than 2-year lows in August.
- Brexit jitters and stronger US dollar to undermine the GBP/USD pair.
The GBP/USD pair accelerated its decline and hit fresh three-day lows at 1.2887 following the release of dismal UK manufacturing PMI report, which showed the UK’s manufacturing sector activity grew at the weakest pace in 25 months (52.8 actual versus 53.8 expected).
On Monday, Cable opened with a bearish gap of about 35-pips, as the Asian traders reacted to the weekend’s developments around the Brexit talks.
The sentiment around the pound was hit by the European Union (EU) Chief Negotiator Michel Barnier’s comments, opposing the UK PM Theresa May’s latest Brexit proposal. Further, May’s ruling out of the second Brexit referendum also added to the weight on the British currency.
Meanwhile, a phase of bullish consolidation seen in the US dollar across its main competitors, in the wake of mounting global trade war fears and Emerging Markets (EM) currency-crisis, also keeps the bearish momentum intact around the spot.
In the day ahead, the pair will continue to track the broad market sentiment and Brexit -related news for further momentum, as trading is expected to remain light on US Labour Day holiday.
GBP/USD Technical Levels
According to Slobodan Drvenica at Windsor Brokers, “near-term bulls are running out of steam as strong bullish momentum started to ease and slow stochastic continues to trend lower following reversal from overbought territory. Confirmation of reversal needs to close below Fibo support at 1.2897 to trigger deeper pullback and expose next strong support at 1.2852 (20SMA/50% retracement). Res: 1.2928; 1.3000; 1.3028; 1.3045. Sup: 1.2897; 1.2852; 1.2807; 1.2751.”
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