GBP/USD forms bearish pennant as US Treasury yields soften
- The GBP/USD has formed a bearish pennant pattern today.
- The pair is under pressure after strong UK manufacturing PMI data.
- The UK released mixed consumer credit data.
The GBP/USD pair formed a bearish pennant pattern after the mixed economic data from the United Kingdom (UK) and the falling US Treasury yields. It dropped to an intraday low of 1.3885, which was the lowest level since February 18.
Mixed UK economic data
The UK manufacturing sector continued to expand in February as the UK accelerated its vaccination process. According to Markit, the manufacturing PMI increased from 54.8 in January to 57.9 in February. This increase was better than the median estimate of 57.7.
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Markit attributed this increase to a slight increase in new orders in February. At the same time, business optimism increased to a 77-month high as the economic recovery continued. The ongoing vaccination process also helped boost the sentiment. In a statement, Rob Dobson of Markit said:
“That said, improved domestic demand as lockdown restrictions ease and a further rise in manufacturers’ optimism are reasons to hope brighter times are on the horizon, and have already supported a modest rebound in staffing levels since the turn of the year.”
The GBP/USD pair also declined as forex investors reacted to the weak credit data. According to the Bank of England (BOE), the total consumer credit dropped by £2.9 billion after dropping by another £870 million in the previous month.
In the same period, the number of mortgage approvals declined from 102.8k to 98.99k. In total, the amount offered in mortgages declined from £5.34 billion to £5.17 billion.
The GBP/USD pair is also reacting to the reversal in the US Treasury yields. The benchmark ten-year Treasury yield dropped to 1.429% today after climbing to 1.60% last week. The surge in rates led many investors to start pricing-in tapering or Fed rate hikes.
GBP/USD technical outlook
The GBP/USD price has been in a strong uptrend in the past few weeks. However, the price dropped to a multi-week low of 1.3885 on Friday last week. The price also moved below the green ascending channel. It has also formed a bearish pennant pattern that is shown in red. It is also slightly below the 25-day and 15-day exponential moving averages. Therefore, there is a possibility that it will break-out to 1.3850 in the near term.