Manufacturing PMI released last week showed a sharp rebound in the activity in August, mainly aided by export orders. The data pushed GBP/USD above 1.33. Friday’s US non-farm payrolls and wage growth figures disappointed expectations and pushed the spot to a session high of 1.3352, however, dollar recovered losses, thus the pair ended at 1.3290.
Friday’s close kept resistance at 1.3315 (23.6% of 1.5019-1.2789) intact. Moreover, the level has acted as a strong resistance since mid July. In fact, the spot closed above the same on couple of occasions only to be offered the next day.
So the question now is whether the UK services PMI is able to secure a convincing break above 1.3315. Service sector contributes most to the UK GDP hence a better-than-expected figure could indeed result in a day end close above 1.3315, in which case the spot could target level of 1.3641 over the short-term.
On the lower side, Asian session low of 1.3289 is a strong support. Offering Sterling below 1.3289 is an attractive position as slide below 1.3289 would mark another failure to take out/hold above 1.3315. Short-term averages – 5-DMA and 10-DMA are likely to act as support levels below 1.3289.