GBP/USD Still Struggling to Maintain Gains, Despite Data

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GBP/USD broke to a 16 month high, but could be getting cold feet on this breakout. The fiscal cliff solution, albeit temporary, pushed the pair higher, and British manufacturing PMI should have helped it cement the gains. This isn’t happening yet.

GBP USD Struggling January 2 2013

GBP USD Struggling – Click image to enlarge

The first economic indicator released in 2013 came out better than expected: British manufacturing PMI climbed from 49.2 points (after a revision) to 51.4 points. This exceeded predictions of no change at 49.2 points. It also reflects a shift from contraction to growth: the 50 point mark separates the two.

Nevertheless, after the initial euphoria from the fiscal cliff approval in the House, the positive PMI didn’t help the pair from retreating. Cable is now trading at 1.6291, under the all-important 1.63 line, and way below the new peak of 1.6381 seen in the early hours.

Cable is now back in the wide 1.60-1.63 range. Have we seen another false break? For more on the pound, see the GBPUSD forecast.

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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.

5 Comments

  1. Why should the Pound rally from here? On Fundamental’s the UK economy is on a very, very difficult footing. December PMI was only marginally above 50 and should have been expected to rise given pre-Xmas trading. Economic activity in the Eurozone (the UK’s largest target market) continues to contract. UK Government borrowing has been coming in much worse than expected and the UK has yet to enact real Austerity measures, as government spending is only down a paltry 1%. QE remains a real possibility for the UK as a stronger Pound will only make the current challenges worse.

    • Indeed, the UK economy is not doing so well, and there’s a real danger of a triple dip recession. Yet with all this dollar weakness, I had expected GBP/USD to hold on to the gains for a bit longer…

      • Well, perhaps we are seeing a classic case of “Buy the Rumour, Sell the News”. The Euro and GBP had rallied into the fiscal cliff deadline. GBP also struggling at 1.63 We shall see….

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