GBP/USD Technical Analysis: Bears’ Control Continues – 06 March 2023
Britain’s economic recovery in February was stronger than previously reported, according to the final PMI survey from S&P Global. The preliminary services PMI released on February 21 gave a reading of 53.3, which was revised upwards to 53.5 in today’s final release. For its part, Standard & Poor’s Global said, “February data indicated that the services sector in the United Kingdom gained significant momentum.”
Despite the positivity, the GBP/USD did not gain strong momentum, as its gains did not exceed the resistance level of 1.2143, and then it returned to decline in the broader direction, with losses, to the support level of 1.1924, before closing the week’s trading around the level of 1.2043.
According to what was announced, the composite PMI – which includes the manufacturing and services sectors together – was revised upwards to 53.1 from 53. S&P Global added: “Survey respondents often pointed to signs of a shift in customer confidence, supported by a declining state of political uncertainty, and they hope that inflationary pressures will continue to ease in the coming months.”
The latest survey also highlighted that overall input cost inflation fell to its lowest level since June 2021. Moreover, higher export sales contributed to a rebound in total new orders in February, and S&P Global says higher levels of new work from abroad were recorded for three months. consecutive months, with the pace of growth accelerating during this period. Service sector companies often saw stronger demand from customers in the United States and Western Europe. But, says Samuel Tombs, chief UK economist at Pantheon macroeconomics: “It is too early to conclude that a recession has been averted, despite the composite PMI rising above 50 for the first time since July.”
His calculations indicate that the average composite PMI level in the first quarter so far, 50.8, corresponds to a mere 0.1% quarter-on-quarter increase in GDP in the first quarter. Pantheon Macroeconomics believes that UK GDP likely fell by around 0.2% qoq in the first quarter.
The GBP/USD price formed lower tops and found support at 1.1925, forming a descending triangle on the hourly chart.The currency pair has just rebounded from the bottom and may be due to another test of resistance.The 100 SMA is below the 200 SMA, though, the path of least resistance is still to the downside. This suggests that resistance at 1.2050 is a minor psychological sign, which is near the dynamic inflection points of the moving averages, and is likely to hold if tested.
There is a chance of breaking the bottom of the triangle. If this scenario occurs, the GBPUSD pair may fall as high as the triangle pattern. This is about 300 pips high. Stochastic has already reached the overbought area to indicate that the buyers are exhausted, so the downtrend will confirm the return of the sellers. On the other hand, the RSI has room to run up before it reverses overbought conditions, so the rally may continue until it does.
The most prominent for the currency pair and the markets this week will be the announcement of the growth rate of the British economy, then the testimony of US Central Bank Governor Jerome Powell, ending with the announcement of US job numbers.
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