GBP/USD rally fades after mixed UK economic data and strong dollar

The GBP/USD is wavering today after the relatively strong UK manufacturing PMI, weak mortgage data, and the overall strong dollar. The sterling is trading at 1.3710, which is slightly below the intraday high of 1.3758.

UK mixed economic data

The GBP/USD is reacting to the relatively mixed economic data from the United Kingdom today. In a report, Markit said that the country’s manufacturing PMI continued to rebound in January even as the country implemented a lockdown. In total, the PMI rose from 52.9 in December to 54.1 in January. This figure was better than the estimated increase of 52.9. 

Markit attributed this performance to the overall strong demand for manufactured goods and lengthier supplier times. The latter increased due to Covid-19 restrictions and Brexit. Employment increased for the first time in 12 months while input price inflation rose to a four-year high. In a note, Markit said:

The GBP/USD is also reacting to weak mortgage approvals and lending data. In December, the number of mortgage approvals declined to 103.3k from the previous 105.32. The median estimate in a survey by economists was for the approvals to fall to 105k. The total volume of mortgage extended during the month declined to 5.59 billion pounds.

Meanwhile, the GBP/USD is wavering because of the strong US dollar. The dollar rose today as investors in forex reacted to the ongoing risks in the market because of the Wall Street Bets craze. 

GBP/USD technical outlook

The GBP/USD price is wavering today, as shown in the daily chart above. The pair is trading near its two-and-a-half-year high and has formed an ascending channel. Also, it is above the 25-day and 15-day weighted moving averages. 

The Relative Strength Index (RSI) is showing signs of bearish divergence. Therefore, the pair may soon resume the downward trend. If it does, the next support level to watch will be at 1.3600.