The GBPUSD took a tumble on the first trading day of the year as the Markit PMI Manufacturing index fell to 52.5 from 53.3 last month. The expectation was for a small rise to 53.6. The index low for 2014 was 51.4 in September. The high for the year reached 57.0 in April. A reading above 50 is still positive for Manufacturing, however, the market was not swayed by that nugget of positive. The index has been above 50 since February 2013. The service and composite indices will be released on January 6th.
UK Markit PMI Manufacturing dips in December
Traders – who could not wait to get to the desk on the 1st trading of the new year – took the pair lower on the news, with the pair trading at the lowest level since August 7, 2013 (see daily chart below). On that day back, the BOE set a 7% employment threshold. Later they threw out that benchmark. The UK unemployment rate has since moved to 6% and the BOE has not yet changed the rate (just a little history to go with the chart today).
On the way lower, the price fell below the two other lows from that month at the 1.5421 and 1.5426. The low extended to 1.5412 and is currently pausing as the semi- holiday market ponders whether it has done enough downside damage on day 1 of the new year. The high to low trading range is 176 pips, well above the 106 average over the last 22 trading days (around a month of trading).
GBPUSD daily chart
Regardless, the bears are in control and it is up to the buyers to take back control. Looking at the hourly chart, the pair soon after the opening today, fell below the 100 hour MA (blue line in the chart below). Traders leaned against that level to define and limit risk.
The weaker data sent the price falling below the trend lines and lows from last weeks trading. The last break on the hourly chart saw the price move below the 1.5454 lower trend line that connects the most recent lows. A move above this level will be the first hurdle for the bulls if they are to take back some control. Without it, however, the shorts remain in full control. Look for sellers on a test in trading today.
The hourly chart shows the tumble below trend line support.
Looking at the 5 minute chart (see the chart below), traders also leaned against a moving average in early trading. Like the hourly chart, the 100 bar MA on the 5 minute chart, provided another risk defining level to sell against (blue line in the chart below) before the economic release at 4:30 AM ET. The weaker data gave another push lower – sending the pair 100 pips to the downside.
With the large trend move lower, the 38.2-50% of the last leg down will be another levels to eye for corrective resistance. This area comes in at 1.5463-79. Moves toward this area should find sellers if the trend move of the day is to keep it’s momentum.
Trends are fast, directional and tend to move farther than traders expect. It is the 1st trading day of the year. It is still a market that is on semi holiday but you have to respect the action and that is to the downside.
The GBPUSD tumble on the 5 minute chart shows early sellers against the 100 bar MA
