GBPUSD, H1
The UK’s final composite PMI was revised lower to 36.0 from 36.4 in the preliminary estimate, marking a sharp drop from the pre-coronavirus February reading of 53.0. The 36.0 headline reading is the lowest since the PMI data series began in 1998, surpassing the 38.1 reading seen in November 2008, which marked the nadir of the financial crisis that was unfolding at that time. The March survey highlighted a series-record drop in new orders and the lowest business expectations reading since 2012. The composite data reflected pronounced weakness in both the services and manufacturing sectors, which are both sharply contracting. The data isn’t surprising of course, with the virus-containing measures that have caused many businesses to mothball their operations. The one area that is holding up so far is technology, with this sub-sector being the only one to signal a modest expansion, although new work still dropped in this area more quickly than at any time since 2011. While the UK, Europe and other major global economies remain in lockdown, the near future looks bleak. The hope is that once the spread of infection has flattened, and testing for the coronavirus becomes widely available, economies will then be able to start to get back to business. The issue remains how wide of a U the U-shaped recovery will be, as a V shaped bounce now looks unlikely.
Cable touched, 1.2475 yesterday and, after pivoting around the 1.2400 handle all week, gave up over 100 pips this morning following the weak PMI data. The move lower has seen a breach of S1 (1.2335), 1.2300 and a test of S2 (1.2272). RSI trades at 24 and is into the OS zone, MACD histogram & signal line are falling and have been under the 0 line all day, with Stochastics also testing the OS zone. S3 sits at 1.2206. The H1 ATR is 0.0025 and the Daily ATR 0.0307. H4 has been channel bound 1.2450-1.2300 this week and the 20-day moving average sits at 1.2200.
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Stuart Cowell
Head Market Analyst
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