The GBPUSD looks poised to establish a minor bullish pullback - an inherently corrective pattern - within an established downtrend. This could create a bullish trap in the short term, which is why you need to check our last comprehensive analysis of the pair in order to get a real sense of the prevailing market sentiment.
The British services sector has weakened for the third consecutive month and has reached a point where it is in real danger of starting to contract. Markit's Flash Services PMI numbers for August missed the consensus forecasts, as the index was reported at 55.5 points.
Even still, the pound is presently recuperating in the short term. This started happening at the outset of this week's trading session, despite the broader market sentiment remaining ostensibly bearish-oriented.
As can be seen on the hourly chart above, the temporary bullish pullback on the GBPUSD emerged following the completion of an ABCD pattern. Given the persisting bearish bias in the longer term, this entails an opportunity for bears to utilise trend continuation strategies once the pullback reaches a peak.
Notice that the price action is currently consolidating above the 50-day MA (in green), which serves the role of a floating support. Additionally, short term bullish momentum is currently rising, as underpinned by the MACD indicator.
All of this implies that the bullish pullback is likely to be extended a little bit higher. The first most likely turning point is underscored by the 23.6 per cent Fibonacci retracement level at 1.3691, which is about to be crossed by the 100-day MA (in blue).
However, if the price action manages to break out above the two, the bullish pullback could then probe the 38.2 per cent Fibonacci retracement level at 1.3747. The 200-day MA (in orange), another prominent floating resistance, is about to converge with the latter.
As stated above, the Services PMI dropped to 55.5 index points in August, below the market forecasts anticipating a more moderate contraction to 59.0 index points from July's 59.6 index points.
This marks the weakest performance of the sector since February and a somewhat troubling signal for the BOE. That is so because any readings below 50.0 indicate industrial contraction. August's tumble is inlined with a sizable drop in retail sales over the same period.