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GBP/USD Retreats from Resistance on Contracting Manufacturing Sector

British Manufacturing PMI dipped into contraction zone, by scoring only 49.1 points in July, lower than last month’s 51.3 points and lower than 51.1 that was expected. GBP/USD is retreating from resistance as this is a very worrying sign.

Pound/dollar traded at 1.6455 before the release, clearly capped by the 1.6470 resistance line. It now trades at 1.64, with a lot of room for falls until the next cushion.

Purchasing managers in the manufacturing sector disappointed in the past four months, with the scores sliding more than expected. From the highs of above 60 points in January and February (reflecting strong growth), figures close to 50 mean very slow growth. A drop under 50 means contraction, and this is what we got now.

Later this week, we have PMIs from the services and housing sectors which are expected to trigger high volatility.

The rate decision on Thursday isn’t expected to provide news though. Despite high inflation in the UK, the economy is hardly growing and policymakers prefer to leave the rates unchanged, probably for another year or so.

Support is found at the region of 1.6280 to 1.63, followed by 1.6110. Resistance is at 1.6550. For more levels and analysis, see the British pound forecast.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.