Yahoo Finance GBP/USD Shows Signs of Struggle at the 1.2600 Level
The British pound showed a renewal of upward momentum in the early week but this was not enough to take it above the 1.2600 versus the dollar on Wednesday.
Investors are encouraged by the easing of lockdown restrictions and some progress in Brexit talks although economic data over the past two days has highlighted how hard the British economy has been hit by COVID-19 compared to others.
Today’s construction PMI figures improved to 28.9 from a record low of 8.2 at the last reading although continues to point to a contraction. Yesterday’s services PMI signaled the same thing with a reading of 29.0.
The PMI data shows that the UK still has some ways to go in terms of a recovery and GDP growth is expected to be hit hard in the second quarter.
Meanwhile, employment data from the US was much better than expected with the ADP report showing 2.76 million people losing their jobs in May versus the analyst estimate of 9 million. Further, there was a slight revision lower in the number of people out of work in the prior reading.
The ADP report sets a positive tone for the more widely watched NFP jobs report set for release on Friday. Analysts have forecast that this report will show a rise in the unemployment rate to 19.5% and expect it to show a loss of 8 million jobs.
Technical Analysis
GBP/USD shows signs of slowing momentum at the 1.2600 price point, ahead of major resistance that stems from the 200-day moving average which is currently at 1.2662.
In the session ahead, the 1.2600 level may continue to create an upside barrier for the pair. To the downside, support is seen at 1.2500 followed by 1.2467.
The former marks a psychological price point which carries some confluence with the lower bound of a rising trend channel that has encompassed price action since the end of May.
Bottom Line
GBP/USD loses some upward momentum as sellers defend the 1.2600 level.
Yesterday’s ADP data sets a positive tone for tomorrow’s more widely watched NFP jobs report in the United States.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
