GBP/USD breaks support after mixed UK CPI and PMI numbers

The GBP/USD price has dropped for the past five consecutive days partly because of the stronger US dollar. It is trading at 1.3712, which is 3.80% below the year-to-date high of 1.4244. 

Mixed UK economic numbers

The GBP/USD is falling as forex traders reflect on the relatively mixed economic numbers from the UK. On Tuesday, data by the Office of National Statistics (ONS) showed that the unemployment rate improved from 5.1% in December to 5.0% in January. This improvement happened even as the country dealt with the lockdown to curb the new coronavirus variant. 

On Wednesday, data revealed that the UK is not facing a substantial inflation risk – for now. Data by the ONS revealed that the headline consumer price index (CPI) increased from -0.1% in January to 0.1% in February. On an annualised basis, the CPI declined from 0.7% to 0.4%, which was lower than the estimated 0.8%.

The closely-watched core CPI increased from -0.5% in January to 0.0% in February. The median estimate was for the number to rise to 0.5%. Core CPI fell from 1.4% to 0.9% on a year-on-year basis. 

Meanwhile, the retail price index remained unchanged at 1.4% while the PPI input and output increased by 2.6% and 0.9%, respectively. The 10-year UK government bond yield declined to 0.74%.

The GBP/USD is also reacting to the relatively positive manufacturing and services PMI numbers from the UK. According to Markit, the manufacturing PMI increased from 55.1 in February to 57.9 in March while the services PMI rose from 49.5 to 56.8 in March. This pushed the composite PMI to 56.6 from 49.6. 

The three figures were better than estimates. The output rose as more companies continued to reopen as the country continues to ramp-up the vaccination process.

GBP/USD technical forecast

The four-hour chart shows that the GBP/USD formed a rectangle pattern in the past few days. The support and resistance levels of this pattern are at 1.3778 and 1.400, respectively. Today, the pair managed to make a bearish breakout and dropped to 1.3670. The pair remains below the short and longer-term moving averages. It is also along the lower line of the Bollinger Bands. Therefore, the path of least resistance for the pair is lower, with the next key support being at 1.3600.