The pound was sold-off on Monday and the GBPUSD pair was trading 0.35% lower during the London session, seen hovering around 1.3365 as traders sold the currency after surprisingly weak data earlier in the day.
Manufacturing production in the United Kingdom deteriorated sharply in April and printed 1.4% year-on-year, down from 2.9% in March, while analysts had expected an improvement to 3.1%. Industrial production slowed as well and scored only 1.8%, down from 2.9% previously and also well below 2.7% expected. Monthly changes also weakened notably and ended in negative territory. The pound lost around 50 pips in the initial reaction.
Furthermore, this weak data suggest the GDP for the second quarter might turn negative, or be very close to zero. The Bank of England could raise rate in August, but weakening economic numbers could deter the BoE to raise and therefore sterling could be vulnerable in the near future.
There are no major news on the agenda today, but sentiment is positive after the weekend G7 meeting and therefore dips could be bought. However, bears are currently under control from an intraday perspective and as long as the pair trades below 1.34, the short-term outlook remains bearish.
The support line of previous lows is now being tested again and is located around 1.3370. If it cracks, the pound could deteriorate to another strong support of 1.3315.
On the other hand, the resistance is now seen at 1.34 and afterward near the 1.3440 level. Bulls need to push sterling above to return to the bullish bias. In all cases we strongly recommend to have rigorous money and risk management.
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