The flash estimate for the UK Manufacturing PMI index showed a decline. However, the final data turned out to be better. According to the preliminary estimate, the index was projected to decrease to 56.9 from 57.9. In fact, it dropped only to 57.3. However, this was not the main catalyst for the growth of the pound sterling. There are two main factors for its rise. Firstly, this is upbeat data on the euro area labor market. The euro advanced significantly after this report, pushing the pound sterling higher. Secondly, traders are highly anticipating the interest rate hike by the Bank of England. The meeting will take place tomorrow. These expectations are fueling demand for the pound sterling today.
UK Manufacturing PMI
US ADP Employment Change
At the same time, US macro statistics may also facilitate the rally of the pound sterling as ADP employment data is excepted to show growth of 220,000 jobs. The figure is quite positive. however, in comparison with the previous month, when the economy added 807,000 jobs, it is rather a modest increase.
After a short-term pullback, the pound/dollar pair entered the correctional phase following a breakout of 1.3500. It triggered an increase in the volume of long positions. It may undermine the recovery of the US dollar that started on January 14.
The RSI indicator moves in the upper zone of 50/70 on the 4H chart, which confirms the correction in the market.
The Alligator indicator changed the direction of the moving averages lines from a descending to an ascending one on the 4H chart. It also signals correction. On the D1 chart, the indicator shows the intersection between the lines, which means a slowdown in the downward movement.
On the daily chart, earlier there was a signal about a gradual resumption of a downward movement. Due to the prolonged correction, this signal may turn out to be false if the quotes rise above 1.3600.
Outlook:
The pound/dollar pair is in the correctional phase. However, traders do not exclude an increase in the pound sterling provided that its quotes consolidate above 1.3530. In this case, the price is likely to hit 1.3600.
Alternatively, the price may decline below 1.3480. If so, it could be a signal of the gradual completion of a correction.
The Complex indicator analysis gives a buy signal on short-term and intraday charts amid the ongoing correction. Technical indicators give mixed signals in the medium term.