Can GBP/USD resume its Bullish Trend?
GBP/USD to reverse the bearish trend
The currency pair GBPUSD extended its losses on Tuesday and dropped to its fresh daily low of 1.2282. The British Pound was under heavy pressure after the release of dismal UK debt data and the soft UK PMI data. Furthermore, the strength of the greenback also added to the negative momentum despite the improved risk sentiment in the market.
GBP/USD Fundamental Analysis
On Tuesday, the December Public Sector Net Borrowing data raised to a record 27.4 Billion Pounds, weighing heavily on the Sterling. This reading was extremely high compared to November’s 18.8 billion pounds. The surprising thing was that the forecasted figure was even lower, 17.3 billion pounds for December; however, the actual figure of 27.4 Billion shocked investors.
It is expected that the main drivers of high UK debts were the increased government subsidies for electricity and gas along with the rising interest payments. As this data was weighing on British Pound, the negative reading of UK Services PMI added further weight and dragged GBP/USD downwards.
The Manufacturing PMI from the UK was strong at 46.7 against the forecasted 45.4. But the Services PMI fell short of the expected 49.6 and came in at 48.0. These reports depicted mixed views for the UK economy and weighed on GBP, adding extra pressure on GBP/USD.
Meanwhile, the US manufacturing and services PMI data is yet to be released, which will provide an overview of the US economy for January.
GBP/USD Technical Analysis
The 4-Hour Chart shows a massive price fall in the previous 8 hours. Furthermore, the price has broken below the critical support level (50-SMA – yellow line). On the one hand, where the price is breaking below 50-SMA, suggesting that there might be a bearish breakthrough, the stochastic indicator suggests that the price has reached the oversold region.
If the seller continues to keep the pressure, the GBP/USD is likely to fall to the initial support of 1.22488. Any break below this level could trigger further downside to 1.22107. However, if the GBP/USD currency pair holds this 50-SMA level and doesn’t fall further, it will find its resistance at 1.23108. This hour candle will be a decisive one as it will give indications about the coming price momentum. Will the USD PMI data weigh further or halt the downward momentum?
GBP/USD Daily Technical Levels
Pivot Point: 1.2382