Yahoo Finance GBP/USD Nears 200 DMA Which Has Been a Major Hurdle
Sterling has rallied nearly 2% against the greenback in the week thus far but technical traders will be keeping a watchful eye on the pair as it approaches important resistance.
A major hurdle stems from the 200-day moving average which capped two prior rallies in April. On the other hand, if the pair manages to break upward, it would signal a significant breakout as the exchange rate has otherwise been confined to a range since April.
Survey data from British purchasing managers in the services industry continue to highlight how hard the UK economy has been hit by COVID-19. While the PMI index improved to 29.0 from 13.4 in the prior month, it remains firmly in contraction territory.
Duncan Brock, Director at the Chartered Institute of Procurement & Supply commented: “As the pandemic progressed any hoped-for bounceback in business output never really got going in May following the previous month’s awful results”
Non-Manufacturing PMI data will be released out of the US later today as well as the ADP jobs report which stands to trigger some volatility. Today’s ADP report is expected to show 9 million jobs lost in May.
Technical Analysis
GBP/USD shows strong short-term upward momentum, similar to most of the major currencies, as a result of a broadly weaker dollar.
From a broader perspective, the pair has been in a range with declines below 1.2200 attracting bids since early April. Overhead resistance at 1.2625 has been a major obstacle as the 200-day moving average has drawn sellers. The moving average is currently located at 1.2661.
The pair is starting to show signs of slowing momentum after posting four consecutive daily gains. This may be an area where the exchange rate can pull back, although there have not been any clear signs of selling at this point.
The US dollar index (DXY) has posted six consecutive daily declines and is down 2.5% from its peak last week. It currently trades at lows not seen since the middle of March.
Bottom Line
UK PMI data showed that the economy has not shown much improvement as of yet. However, the recent easing of lockdown restrictions stands to have a positive impact.
The ADP will release data on the US jobs market later today and the Bureau of Labor Statistics will release their version on Friday.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
