The strength seen in the GBPUSD pair lately is mostly due to the weak USD. The USD sold across the dashboard for quite some time now, despite the USD liquidity in the international financial system actually shrinking.
However, the GBP gained not only against the USD, but also against the CHF or even the almighty EUR. The GBPCHF pair also reached an important milestone above 1.20, while the EURGBP cross fell below the 0.9 level.
UK PMI Manufacturing Beating Expectations
Today’s PMI Manufacturing data out of the United Kingdom came at 32-month high – but failed to boost the pound. One explanation is that the strong manufacturing data was already priced in, as the country reopened after the coronavirus lockdown.
Nevertheless, it confirms the manufacturing sector’s resilience and a strong comeback. However, because the UK economy is a service-based one, the manufacturing sector tends to have a smaller effect on the UK GDP. Thus, it is often ignored by traders.
GBPUSD Technical Picture
The GBPUSD pair broke out of a triangle that acted as a reversal pattern. The move above 1.30 completes a fantastic reversal of the entire drop caused by the equities meltdown in late March.
However, the price action following a triangle’s break usually retests the trendline after the break. Such a retest did not come yet, and this is where the GBPUSD bulls will step in.
Therefore, to trade the retest, place a pending buy limit order at 1.30 with a stop-loss order around 1.28 area. Finally, for the trade to make sense, an appropriate risk-reward ratio requires a take-profit level above 1.3450. With the BOE and NFP later in the trading week, nothing seems impossible.