GBP/USD – Play the trend lines, Eyes UK manufacturing data
Liquidity is thin and could get worst as we move closer to Brexit referendum. Off late, Sterling has stopped responding to UK economic data releases and Brexit polls appear to have taken the center stage.
Resistance – 1.4590-46, 1.4660, 1.47
Support – 1.4530, 1.4468, 1.44
UK Manufacturing production could disappoint
Manufacturing production is expected to have stalled in April, following a 0.1% m/m rise in March. However, the actual figure could contract if we take into account the dismal April manufacturing PMI reading.
The Markit/CIPS UK Manufacturing PMI had dropped to 49.2 in April from March figure of 50.7. New export orders had dropped for fourth straight month in April as well.
Hence, we might see a miss on the estimates, which could weigh over Sterling, although sharp losses are unlikely, given the bird had suffered sharp losses on May 3rd (when dismal April PMI was released).
Resistance – 1.4590-46, 1.4660, 1.47
Support – 1.4530, 1.4468, 1.44
- Cable currently trades around 1.4550 levels.
- The falling trend line (red) has acted as a strong support since Q3 2015. Moreover, day end closing above the trend line has been met with fresh selling, thus ensuring the weekly closing was always below the trend line level.
- Hence, a break above trend line resistance seen today at 1.4590-1.46 should be treated with caution. Nevertheless strong UK data and absence of fresh polls could make life easier for bulls to attempt a break above 1.46 and move towards 1.4660 levels.
- On the other hand, a failure to take out 1.4590-1.46 followed by a drop below daily low of 1.4530 would shift risk in favor of a slide to 1.4450 levels.
- Note, the daily RSI too appears to have turned the corner. The rising bottoms is history and the indicator is now showing falling tops. Thus, Cable’s failure to take out 1.4590-1.46 followed by break below 1.4530 could trigger a sharp fall.
- On a larger scheme of things, support of rising trend line (black) needs to breached in order to signal bullish invalidation.
UK Manufacturing production could disappoint
Manufacturing production is expected to have stalled in April, following a 0.1% m/m rise in March. However, the actual figure could contract if we take into account the dismal April manufacturing PMI reading.
The Markit/CIPS UK Manufacturing PMI had dropped to 49.2 in April from March figure of 50.7. New export orders had dropped for fourth straight month in April as well.
Hence, we might see a miss on the estimates, which could weigh over Sterling, although sharp losses are unlikely, given the bird had suffered sharp losses on May 3rd (when dismal April PMI was released).
