Market Analytics and Considerations
Key Notes
- GBP/USD Decreases 170+ Pips.
- Manufacturing PMI in the UK drops to a 31-month low.
Foundational Silhouette of GBP/USD
As the dollar index started to move, GBP/USD fell underneath the crucial 1.2000 threshold for the first time in 4 weeks. With some important data events coming up in the week, it appears that GBPUSD has eventually discovered some heading after being trapped in a 100-plus pip range since December 19.
Following a few weeks of erratic price movement, the dollar index has finally roared back to life, contributing to the drop in the GBPUSD this morning. The dollar index required some encouragement after a less-than-impressive 2022, which included three straight months of declines. The open today implies that could persist. January has generally been a triumph for the dollar – we can see that the index is on the verge of breaking out of the wedge configuration which has been in place from November 15, which might also result in a big upward rise.
Source: TradingView
The UK data released this morning showed that manufacturing will have a dismal finish to 2022, with the S&P Global / CIPS UK Manufacturing Purchasing Managers’ Index falling to a 31-month trough. The reading of 45.3 for December is lower than the reading of 46.5 for November, and quicker reductions were seen in production, new orders, and jobs. Domestic and international consumption remained weak as the area tends to be burdened by economic uncertainty, client destocking, and consumers delaying orders.
Prior to Wednesday’s release of the FOMC notes and Friday’s NFP statistics, the economic schedule only offers one more significant data point today in the form of the US Manufacturing PMI.
Technically speaking, the sharp loss this morning raises the possibility that GBPUSD will temporarily retrace. The pair is now moving back toward the 1.2000 level or slightly above to the 200-day MA, which is about 1.2040, after it just recovered off the 50-day MA, which may act as support. The RSI, which would be presently in oversold territory, supports a correction as well. Nonetheless, the general bias is moving toward more losses, particularly if an upward breach of the wedge structure on the dollar index eventuates. A breakthrough on the dollar index might cause the GBPUSD to fall, putting the 100-day MA and support at 1.1750 in question.
