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GBPUSD: Testing the lower channel line

The main drag on the British economic recovery is the weakness in UK manufacturing managers index (PMI) as the latest figures sunken last week, showing a drop to 51.5 in September, down from 51.6 in August. While remaining above the 50 threshold indicating growth, September’s PMI was only just above a two-year low hit in June.

At the end of last week the USD initially sank after an unexpectedly poor US jobs report suggested the Federal Reserve (Fed) may wait to raise interest rates until next year, but scraped back some of its losses.

Since the start of the year the currency fell more than 0.5% and is in a bearish phase since late of September. Last week the GBPUSD went back and forward without any clear direction with a narrow range but closed in the red near the open of the week. The currency is testing the lower channel line and the stochastic is showing a slight bearish momentum.

Expecting an upward move to a weekly resistance at 1.5483 on a break above previous week high at 1.5241 (scenario 1) or a break below previous week low at 1.51065 could push the currency down to year low at 1.4566 (scenario 2).