GBP/USD Price Prediction: Cable Flood Gates Open to Fresh Wave of Sellers
- GBP/USD was under heavy attack throughout the session on Tuesday, following a poor UK services PMI data release.
- The next major areas of support should be noted at 1.2900, 1.2870-30 and then 1.2750-00.
The British pound was hit with heavy selling pressure on Tuesday, resuming the trend which was kick-started last week. Looking at GBP/USD specifically, it saw its first weekly close in the red after six straight weeks of gains. The price ran into a heavy supply area, which can be seen tracking from the 1.3200-1.3300 range. It has not traded convincingly above this zone since June 2018, which demonstrates the significance of its strength.
Poor UK PMI Data – Economy at Risk of Stalling
The value of the pound is being heavily driven by weak fundamentals seen on both the economic data front and Brexit recoil. Today saw the release of the UK Services PMI, which makes up around 70% of the country’s entire GDP. The number produced was very much disappointing, coming in at 50.1 vs. expected 51.1 and the previous 51.2. IHS Markit chief business economist Chris Williamson had the following to say about the release:
“The latest PMI survey results indicate that the UK economy is at risk of stalling or worse as escalating Brexit uncertainty coincides with a wider slower slowdown in the global economy. “Service sector growth ground almost to a halt in January, matching similar disappointing news in the manufacturing and construction sectors. The last three months have seen the economy slip into its weakest growth spell for six year. They indicate that GDP likely stagnated at the start of 2019. This being after eking out modest growth of just 0.1% in the fourth quarter.”
Technical Review – GBP/USD
In terms of GBP/USD, the pair was slammed over 100 pips during the session on Tuesday, given the above-detailed circumstances. Downside was initially limited in the early part of the European session, which was thanks to the big psychological 1.3000 mark. This provided some comfort initially before pressure from the bears became too much. Once the sellers managed to force a breach of this territory, a fresh wave of selling pressure was seen.
A drop of almost 80 pips was seen after this support breakout, seeing the price fall to a sessions low of 1.2924. This was the lowest it has been since 22nd January during the month’s bull run. The major area of support is eyed just further south, initially at the 38.2% Fibonacci of the January rally. That corresponds to the 1.2900 territory. An area of demand is seen slightly below at 1.2870-30 range, which supported the price on several occasions, mid-January.
Should the above-detailed areas of support fail to catch the falling price, then another drop to the 1.27 territory will be eyed. Another zone for buyers can be seen tracking from 1.2750 to the round 1.2700 figure.
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