Yesterday, we saw the GBP/USD rising as part of a corrective pattern, albeit at a more modest pace than on Friday. An increase came despite rising oil prices and extremely high gas prices.
The market seems to be somewhat tired from the energy crisis in Europe and the negativity associated with it. Moreover, the OPEC+ cartel has decided to increase oil production. So, the level of output is likely to rise sooner or later. This will inevitably cause a drop in energy prices.
At the same time, the main factor driving the GBP down is its oversold status. Today, the British currency is expected to be bullish because the correction is unlikely to end any time soon. However, the United Kingdom’s business activity indices are estimated to slow down.
The services PMI is projected to drop to 54.6 versus 55.0 in the previous period. Meanwhile, the composite index is set to fall to 54.1 from 54.8. These will be the final results that are likely to come in line with the preliminary estimates already priced by the market.
United Kingdom Composite PMI.
Elsewhere, a decline in business activity is expected in the United States. The services PMI is estimated to fall to 54.4 from 55.1, while the composite index should drop to 54.5 versus 55.4 in the previous period.
Like in the UK, the final data should come in line with the flash estimates. Therefore, the results are likely to be ignored by market participants. Anyway, the greenback has increased significantly over the previous month and is overbought.
US composite PMI.
GBP/USD has been moving in a corrective pattern for three days. The pivot point sits at the support level of 1.3400. The pound has strengthened by more than 220 pips over this period. Meanwhile, the RSI has not reached the overbought zone.
The correction is an integral part of the downtrend that started in early June based on the daily chart.
GBP/USD has reached the 23.6% retracement level where the corrective move slowed its pace. We can assume that the downward trend may resume in case of a pullback and consolidation below 1.3565. If so, the price is likely to head towards the support level of 1.3400.
Alternatively, the correction may continue if the quote consolidates above 1.3640. In such a case, the price may move towards 1.3700, where the RSI suggests the pair becoming overbought.
In terms of complex indicator analysis, technical indicators give a buy signal for short-term and intraday trading due to a technical correction. In the mid-term, technical indicators are signaling to sell the instrument.
GBP/USD technical analysis.