Last Friday, $GBPUSD moved beyond the 1.5250 resistance that has capped rallies since February. This price move is pretty significant and sets cable up for a nice correction of the entire breakdown into the 1.5600 50% Fibonacci level. However, despite the new highs, sterling came off its across-the-board Friday highs as corrections set in during the Monday trading session.
Price so far has managed to find support in the former resistance zone between 1.5230 and 1.5250. But bulls shouldn’t get too aggressive here. Later this morning, markets expect the release of UK manufacturing PMI number. As manufacturing and construction data releases have been poor all year, the market expects another weak number. I expect knee jerk price reaction on a poor release to send $GBPUSD lower into the yellow buy zone. But because the market expects such a release, the bearish sentiment will be short-lived. As such, I expect that price can still move higher still into 1.54 long-term support-turned-resistance. Conversely, a stronger-than-expected release has the potential to reignite this GBP rally ahead of the 50% Fibonacci level. Trade what you see!
Background reading:
Can Sterling Really Rally? (FaithMightFX)
Sterling Digest, April 8 2013: freedom to grow (FaithMightFX)
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