Welder, UK. Image source: Hortlander, flickr.com
The better-than-expected manufacturing PMI for November did not help the struggling pound, as the currency continues to break lower. You can read more about the sterling's problems in the short term from our latest GBPUSD analysis.
It was revealed that UK factory activity jumped in November, beating the initial market forecasts. The pick-up in industrial activity in the region was also underpinned earlier today by the robust services numbers in Germany. Despite the better-than-expected manufacturing PMI data, the pound continued to sink lower.
GBPAUD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the 4H chart above, the price action of the GBPAUD is currently consolidating around the 38.2 per cent Fibonacci retracement level at 1.85196. The latter is converging with the 300-day MA (in purple), making it an even more prominent resistance level.
It appears that the price action is currently attempting to reverse from this major threshold, which is also substantiated by the current reading of the MACD indicator. The histogram is already declining, signifying mounting bearish momentum.
A possible denial at the 38.2 per cent Fibonacci is likely to be followed by a dropdown to the 23.6 per cent Fibonacci at 1.83699. The latter was recently crossed by the 200-day MA (in orange), and is currently consolidating with the 100-day MA (in blue).
Conversely, a rebound from the 38.2 per cent Fibonacci would likely be followed by a test of the consolidation area's upper limit, which is currently converging with the 400-day MA (in green).
Improving factory activity in the UK
UK MoM Manufacturing PMI. Image source: TradingEconomics.com
UK's manufacturing PMI was reported at 58.2 index points in November vs the 57.8 index points that were recorded a month prior. The preliminary forecasts were anticipating a marginal drop to 57.2 points.
The robust numbers are inlined with a sizable increase in UK consumption that was recorded over the same period. Meanwhile, the primary focus of investors and traders continues to be the developing situation between Russia and Ukraine.
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