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GBP/USD closes below 100-day MA for first since Oct. 9, eyes UK PMI

  • GBP/USD registers first daily close under the 100-day MA since October. 
  • Chances of disorderly UK exit from the EU are rising. 
  • Risk reversals are reporting bearish bias with a negative print. 
  • A big beat on the UK PMI is needed to weaken bearish pressures. 

GBP/USD closed below the 100-day moving average (MA) on Thursday, its first daily close below the widely-tracked major average support in 4.5 months. 

So far, however, the violation of the long-term MA support has failed to draw strong offers. The GBP/USD pair is currently trading at 1.2892, representing marginal gains on the day, having hit a three-month low of 1.2849 on Thursday.

Focus on UK PMI

The preliminary Markit Manufacturing PMI (Feb) is forecasted to print at 49.7, indicating a contraction in the activity following January’s neutral reading of 50.00. The selling interest around the British Pound will likely gather steam if the PMI number prints below estimates. 

Note that the chances of disorderly UK exit from the European Union have increased to 25% from 20% seen in January, according to Reuters poll. As a result, Pound is unlikely to find takers, unless the PMI betters expectations by a big margin and the broader market sentiment improves, weakening the haven demand for the US treasuries. The US 30-year yield fell to 1.95% on Thursday, the lowest level since September. 

Risk reversals show put bias

One-month risk reversals, a gauge of calls to puts on the British Pound, fell to -0.225 on Thursday, having topped out at 0.00 recently. The slide represents the rise in the premium claimed by the put options, a sign the investors have added bets to position for losses in Sterling. 

Technical levels

 

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