Will GBP/USD extend the two-day winning streak?

GBP/USD successfully defended the support of 50-DMA and 200-DMA on last Wednesday before rallying on Thursday and Friday. The currency pair hit a low of 1.2375 last week before jumping to a high of 1.2556 on Friday.

Cable is trading slightly weaker around 1.2530 levels this Monday morning in Asia. Whether the pair extends the two-day winning streak largely depends on the UK manufacturing PMI report and US ISM manufacturing data due for release today.

Export orders could boost UK manufacturing PMI

The industrial trends survey from the UK Confederation of British Industry (CBI) released on March 21 said the export order balance with British manufacturers in March rose to the highest level since late 2013 and expectations for growth reached a more than two-decade high. The sharp rise in the export orders could be due to the weak Pound.

The CBI data also showed manufacturers are concerned about rising prices in the survey.

The manufacturing PMI due for release today could confirm the strong export orders (inflow of fresh orders) and a rise in prices (input costs due to weak Sterling). The headline figure is seen rising to 55.1 in March from February’s 54.6. A better-than-expected figure could boost GBP/USD and increase  the odds of the pair extending the two-day winning streak.

Focus on US ISM Manufacturing

US ISM manufacturing (expected: 57.00, previous: 57.7) figure is expected to show the pace of expansion in the activity remained largely unchanged in March. Note that the sentiment has turned bearish on the US dollar; hence a weaker ISM data could lead to sharp rise in the GBP/USD.

GBP/USD Technical Levels

A break above 1.2556 (Friday’s high) would expose major resistance at 1.2615 (Mar 27 high). A daily close above the same could see the pair test supply around the 200-DMA level of 1.2669. On the other hand, a breakdown of support at 1.2487 (5-DMA) could yield a re-test of 1.2421 (100-DMA). A daily close below the same would signal the rally from the low of 1.2109 (Mar 14 low) has topped out. Strong support at 1.2346 (Feb 7 low) could then be put to test.