The Cable is currently trading at key support around 1.6725, having carved out fresh daily lows ahead of the UK manufacturing purchasing managers’ index (PMI) survey release during the early European session.
Released at 09:30 GMT, the survey data revealed a diffusion index level of 56.9, a gain both on January’s 56.6 and on the February forecast at 56.5. The data represents the 11th straight quarter of PMI-inferred expansion, and points to a better than expected second quarter for the UK manufacturing industry. Employment across the industry supports this bullish bias, with jobs growth in the UK manufacturing sector rising at its fastest rate since May 2011.
Looking at the short-term technicals, if the cable can maintain its bullish momentum heading into the European afternoon, expect the pair to meet resistance just shy of 1.6750, a level from which the GBPUSD has reversed on numerous occasions during the last two weeks. Looking slightly longer term, Friday’s action saw a break above two-weekly highs and Monday’s positive data might catalyze a rise towards February 17 highs at 1.6821, a level not reached by the cable since mid-2009.
Elsewhere, the equivalent release from both Germany and the wider Eurozone failed to have the same impact as in the Cable, despite comparatively positive results. Germany’s manufacturing PMI data revealed a diffusion index level of 54.8 versus a forecast of 54.7. Similarly, the Eurozone’s Manufacturing PMI revealed an index level 53.2 versus a forecast of 53.0.
The muted response from the EURUSD likely comes in anticipation of some key U.S. releases scheduled for the European afternoon session. Core PCE price index (MoM) and personal spending (MoM) come at 13:30 GMT, and ISM manufacturing comes at 15:00 GMT. Analysts forecast 0.1%, 0.1% and 52.0 for the respective releases.
Furthermore, at 14:00 GMT, the President of the ECB, Mario Draghi, is set to testify before the Committee on Economic and Monetary Affairs of the European Parliament. A hawkish testimony could boost the strength of the Euro, fueling bullish sentiment heading into the U.S. releases.
Expect the EURUSD to consolidate heading into these releases, but expect strong volatility from 13:30 GMT onwards.
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