GBP/USD Can the bulls protect the 1.3000, again?

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the main points

  • The GBP/USD pair failed to stay above the 1.3150 support level and fell sharply below the 1.3100 level.
  • The crucial Expansion/Broading Top triangle is forming with support near 1.2984 on the 4 hours chart.
  • The UK Manufacturing PMI rose from 49.8 to 50.0 in January 2020.
  • The UK construction PMI may rise from 44.4 to 44.9 in January 2020.

Technical Analysis GBP / USD

Over the past week, the British pound recovered well from a low of 1.2977 against the US dollar. GBP/USD rose above the 1.3100 resistance, but struggled to stay above 1.3150 and fell sharply.

GBP/USD Can the bulls protect the 1.3000, again?

Looking at the 4 hours chart, the pair traded at a high of 1.3209 and recently started a sharp decline. There was a break below the 1.3100 support level and the 100 simple moving average (red, 4 hours).

Moreover, the pair fell below the 50% Fib retracement level of the upward movement from the 1.2977 low to 1.3209. The pair appears to have pared most of its gains and is still at risk of further losses.

More importantly, there is a crucial extended triangle forming with support near 1.2984. If the pair fails to stay above the 1.3000 support level and the 1.2980 region, it may decline significantly.

The next major support is near the 1.2940 and 1.2920 levels. Conversely, GBP/USD may bounce back from 1.2980 or 1.3000. On the upside, there is an initial obstacle near 1.3080, above which the pair may rise towards the 1.3150 resistance zone.

Basically, the UK Manufacturing PMI for January 2020 was released by both the Chartered Institute of Purchasing and Supply and Markit Economics. The market was not looking for any change in the PMI from 49.8.

The actual result was better than expected, with the UK Manufacturing PMI rising from 49.8 to 50.0, with new orders, employment and business confidence rising.

The report added:

The start of 2020 has seen the UK's manufacturing sector perform flat following the slump experienced for most of the past year.

In general, the GBP/USD pair may bounce as long as there is no close below 1.2980. Similarly, EUR/USD must stay above 1.0000 to stay in positive territory. If not, it could drop sharply below 1.0990.

Upcoming economic releases

  • UK construction PMI for January 2020 - forecast 44.9, versus 44.4 previously.
  • US Factory Orders for December 2019 - forecast +1.1%, vs -0.7% previously

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