The British pound showed a strong rebound against the greenback last week but with the dollar starting to regain some strength, traders will be assessing if it will mark a turning point for the GBP/USD pair.
Purchasing managers survey data for the manufacturing sector in the UK pointed to a contraction in March to end a two-month streak of growth. Reporting agency Markit attributed the deterioration to the Coronavirus as it disrupts supply chains for manufacturers and has caused a decline in business optimism.
Manufacturing PMI figures will be released from the US later today and are also expected to show a contraction.
The services industry in the UK has a much larger contribution to GDP and data related to it will tend to have a greater impact on the exchange rate. Services PMI figures are scheduled to be released on Friday, and analysts are expecting a steep drop into contraction.
Despite the notable recovery in GBP/USD last week, the pair closed the month of March with a more than 3% loss. For the first quarter of 2020, the pair posted a decline of 6.35%. The pound to dollar exchange rate had reached a high just above 1.3500 in December on a rally that followed immediately after the UK election.
GBP/USD traders will want to keep an eye on the dollar as the currency pair signals indecision over the past few sessions.
The US dollar index (DXY) is attempting to retake a horizontal level at 99.61 which previously acted as major resistance in September and in February. A push above the level might suggest the greenback has resumed it’s prior uptrend.
A range has developed in the pound to the dollar exchange rate. A rising trendline intersecting with a horizontal level at 1.2291 creates an important support confluence for the session ahead. A break below the support area would signal a bearish reversal.
To the upside, the 1.2482 level has proven to be a major hurdle. Bulls will want to see the exchange rate scale above it to signal an upward continuation.
- GBP/USD continues to hold within a consolidation, a break in either direction is likely to signal a new near-term trend.
- Manufacturing PMI data and the ADP jobs report will be released out of the US later in the day.
This article was originally posted on FX Empire
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