GBP/USD: Bearish bias still intact ahead of UK PMI
- Brexit jitters and USD strength will continue to keep the recoveries limited.
- Looks to breach March low at 1.3712 on downbeat UK manufacturing PMI report.
Despite a minor bounce, the GBP/USD pair remains vulnerable and looks to breach the March low of 1.3712, as markets expect the UK manufacturing sector activity to decelerate in April.
Markets have almost priced-out a May Bank of England (BOE) rate hike, in the wake of the recent downbeat UK fundamentals. And hence, a softer UK manufacturing PMI report is likely to exacerbate the pain in the pound, opening floors for a test of 1.3650 levels.
Further, broad-based US dollar strength is likely to persist, as Treasury yields continue to climb higher on monetary policy divergence and rising inflation expectations. This could also collaborate to further selling in Cable while the renewed Brexit headwinds also keep the GBP undermined.
On Monday, the UK government suffered another setback, as the Lords voted on a bill guaranteeing MPs a vote on a final Brexit deal.
GBP/USD levels to watch
Valeria Bednarik, Chief Analyst at FXStreet notes: “The pair retains its bearish stance according to technical readings in the 4 hours chart, as the 20 SMA maintains a sharp bearish slope well above the current level, while technical indicators managed to correct extreme oversold readings, but lost upward strength far below their mid-lines. The pair bottomed at 1.3711 in March, which alongside with Monday's low makes of the area a major support for the upcoming sessions. Support levels: 1.3710 1.3680 1.3650. Resistance levels: 1.3785 1.3820 1.3850.”