Sterling unlikely to recover ahead of more PMI data!

Sterling headed for its biggest daily fall against the dollar in a month on Monday, hit by a slowing housing market, a manufacturing sector on the brink of contraction and a profit warning from a major mortgage lender.

The troubles at Britain's biggest buy-to-let mortgage lender coupled with data showing new UK home loans tumbled to a record low in April stirred concerns about the health of the UK housing and financial sectors, both key drivers of economic growth. There was also bad news for the economy from the manufacturing sector, where the May Purchasing Managers' Index (PMI) signaled stagnation.

The following technical analysis gives us a detailed lookout on what is expected to happen to GBP/USD.

The buying point is at 1.9690; based on a break of a strong resistance.

Previous resistance is the take profit at 1.9825
Fibonacci 23.6% is the stop loss at 1.9623
The selling point is at 1.9626; based on a clear downtrend.

Fibonacci 61.8% is the take profit at 1.9535
Fibonacci 38.2% is the stop loss at 1.9681
To strengthen our analysis; we use many indicators, starting with MACD (Moving Averages convergence divergence); we notice the crossing of MACD line to the signal line with a break of the equilibrium level. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bearish direction.

The momentum oscillator is very important to understand the strength of the market and as we see on the graph it is in a clear downtrend. The Stochastic oscillator breaks 80% line and continues to go lower.

* The following analysis is for information only; Finotec is not responsible for any decisions or misinterpretations based on the given tex