GBP/USD Testing 1.5190 Support After Longest Bearish Streak Since Last July

06/02/2015 9:00 am EST

Focus: CURRENCIES

The staff at Forex.com takes a technical look at this currency pair in light of the very busy week for economic news. Not only do they highlight the major global data coming out over the course of the week, but they also suggest keeping an eye on the geopolitical risks as well.

The US dollar is gaining a bit of ground at the start of a very busy week for economic data. In case you missed our data previews in Friday's Week Ahead preview report, note that this week's major global releases include US ISM Manufacturing PMI (Monday), the RBA monetary policy decision and statement, UK construction PMI, EuroZone CPI (all Tuesday), EuroZone PMIs and retail sales data, an ECB press conference, UK Services PMI, the US Non-Manufacturing PMI report and ADP Employment report (Wednesday), BOE interest rate decision and statement, Canadian Ivey PMI (Thursday) and to top it all off, the US and Canadian jobs reports for May (Friday), among others.

[Pause here to catch your breath]

Beyond the traditional economic data, traders will also be keeping an eye on geopolitical risks, including the odds of a Grexit (Greek exit from the EuroZone) and Brexit (UK exit from the European Union) as my colleague Fawad Razaqzada noted earlier this morning. In fact, the fears of a potential Brexit as soon as next year hit GBP/USD hard, with the pair shedding around 600 pips from its mid-May peak. The selling was exacerbated by Monday's weaker-than-expected Manufacturing PMI print, which came out at just 52 vs. 52.7 eyed, with the employment subcomponent falling to a stagnant 50.3 reading (50 would indicate no net growth in manufacturing employment whatsoever).

From a technical perspective, the pair is now working on its seventh consecutive bearish day, which would mark the longest streak since the downtrend began back in July of last year. The MACD indicator has rolled over and is about to cross below the ‘0’ level, which would signal an outright shift to bearish momentum.

Monday's low at 1.5196 came within in a whisker of the 50% Fibonacci retracement (1.5190), and with the Slow Stochastics now firmly oversold, an early week bounce is definitely in play if UK data comes out strong or US data disappoints. That said, Cable has shredded through a number of previous support levels over the last three weeks, so a drop below 1.5190 is definitely possible; in that case, a bearish continuation down to the early May low at 1.5080 or the 61.8% Fibonacci retracement at 1.5040 would likely be seen next.

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By the Staff at Forex.com

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