GBPUSD Long-Term Correction (Oct 03, 2017)
Cable has been selling off recently but could be due for a bounce as it tests the support zones visible on its long-term chart. Price is moving inside an ascending channel on its 1-hour time frame and is currently approaching the 50% Fibonacci retracement level at the mid-channel area of interest.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that the uptrend is likely to carry on. The 100 SMA lines up with the channel support at 1.3000, which is also near the 61.8% Fib level.
Stochastic is still heading south on this time frame, so there’s enough bearish pressure left for a deeper correction. If any of the support areas keep losses in check, GBPUSD could climb back to the swing high near the 1.3650 minor psychological resistance.
UK economic data turned out weaker than expected as the manufacturing PMI slipped from 56.7 to 55.9, lower than the projected dip to 56.3. At the same time, Brexit-related issues remain and Prime Minister May’s speeches seem to be doing very little to shore up confidence in the government’s bargaining position.
As for the dollar, the strong ISM manufacturing PMI, which rose from 58.8 to 60.8 versus the consensus at 57.9, led to a boost in NFP expectations. The employment and prices components ticked higher, putting upside pressure on overall employment and inflation. The Markit version of the report saw an upgrade from the initial estimate at 53.0 to 53.1 as well.
Looking ahead, the UK services PMI could be the next big catalyst for the pound, although more headlines pertaining to Brexit could continue to limit its gains. The ISM non-manufacturing PMI and ADP non-farm employment figures could also push the dollar around ahead of the actual NFP release.
By Kate Curtis from Trader’s Way