GBPUSD: Here’s Why the British Pound is Tumbling Today
The GBPUSD pair is down by more than 0.30% as traders react to the relatively weak manufacturing and services PMI numbers from the UK. The pair is trading at 1.2724, which is close to the lowest level since July 22.
The GBPUSD is falling after data released by Markit showed that manufacturing activity in the United Kingdom eased slightly in September. The PMI fell from the previous 55.2 to 54.3. This number implied that manufacturing activity continued to expand but at a slower pace.
In the same period, the closely-watched services PMI fell from 58.8 in August to 55.1 in September. That was worse than the 56.0 that analysts were expecting. As a result, the composite PMI, which combines indices in the two sectors declined from 58.8 to 55.1.
The GBPUSD is also reacting to the rising number of COVID-19 cases in the UK. Yesterday, the country confirmed more than 4,900 cases, which was the highest daily reading in months. This data came a day after the country’s Chief Medical Officer (CMO) warned that the UK could start reporting more than 50,000 daily cases every day.
Meanwhile, the UK government has started enforcing measures to limit the spread. These measures include limiting the operational hours for bars and pubs and lowering the number of people who can attend funerals and weddings.
GBPUSD technical outlook
The daily chart below shows that the GBPUSD pair has been in a sharp descent in the past few days. It has fallen from a high of 1.3480 to the today’s low of 1.2691. On the daily chart, the price is below the 50-day and 25-day moving averages. The two averages are about to make a bearish crossover. Also, the today’s low was along the 61.8% Fibonacci retracement level.
Therefore, I suspect that the pair will continue falling, with the next target being the 50% retracement at 1.2450. On the flip side, a move above the key resistance level at 1.3000 will invalidate this trend.