Pound Sterling Shrugs Off Poor Data
InstaForex Group | Jul 04, 2022 04:09AM ET
After the opening of the European session on Friday, the GBP/USD began to lose. The British currency declined amid the release of the UK Manufacturing PMI index. The reading turned out to be significantly worse than the preliminary estimate. Economists had expected the figure to drop to 53.4 from 54.6. However, it decreased to 52.8.
Curiously enough, the pound sterling did not slide down considerably, which was strange given the influence of the report mentioned above on the market. Besides, GBP managed to rebound a bit later. After the opening of the American session, traders realized that some other factors impacted its movements apart from macro stats.
The US also unveiled its manufacturing PMI. Unlike the UK, the figure surpassed the preliminary forecast. The index was projected to contract to 52.4 from 57.0. Yet, it dipped only to 52.7. However, during the US session, the pound sterling rose. Its increase was a rebound that happened after a noticeable decline. Its upward rebound occurred thanks to technical factors. Notably, it does not contradict the main trend. The US dollar remains stronger amid the widening key rate gap.
Today, trading floors in the US are closed on Independence Day. So, currencies are likely to consolidate at their Friday levels today. American traders provide high market liquidity. Therefore, market activity is going to be sluggish without them.
GBP/USD rebounded from the psychologically important level of 1.2000. It led to a sharp drop in the volume of short positions and an increase in long ones. On the H4 chart, the RSI indicator was in the oversold zone, which was quite expectable given the impulse move of the pair. As a result, this move signaled a price rebound.
Get The News You Want
On the H4 and D1 charts, the Alligator indicator shows that the moving averages are pointed downwards, which is in line with the primary trend.
Thus, a technical rebound could indicate a trend change, which may only strengthen the downward movement later. A sell signal will appear only if the price drops below 1.1950, at least on the 4H chart. In this case, the medium-term downtrend will be prolonged, and traders should brace for new lows. Until then, the pair may remain somewhat volatile.
Due to a technical pullback, the complex indicator analysis gives a buy signal on the short-term charts. Technical indicators signal the extension of the downtrend on the intraday and medium-term charts.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.