UK manufacturing production preview: What to expect of GBP/USD?

The GBP/USD pair faced rejection just shy of 1.30 handle and turned lower thereon, paring heavy gains to now trade around 1.2950 levels.

Focus now shifts to the UK industrial and manufacturing output figure for the month of May, due for release at 08.30 GMT.

Industrial & Manufacturing Production expected to drop sharply

The manufacturing production, which makes up around 80% of total industrial production, is expected to snap the previous rebound to 2.3% and drop sharply to -1.2% in May. Meanwhile, the total industrial production is predicted to fall 1% m/m in May, as compared to a 2% gain recorded in the previous month.

Today's release will provide fresh cues on the state of the UK’s manufacturing sector, especially in wake of Brexit. In reaction the poor data expected, GBP/USD could fall back to 1.29 handle and even test daily lows struck below the last. Any upside surprise to the UK data, could surely take the rate beyond 1.30 handle.

GBP/USD technical levels to watch

Haresh Menghani, Analyst at FXStreet noted, “Sustained move above 1.3000 handle should open room for a fresh leg of short-covering move that could immediately boost the pair towards 1.3050-55 intermediate horizontal resistance before the pair extends its recovery trend further beyond 1.3100 round figure mark, towards 100-hourly SMA resistance near 1.3135-40 region.”

“Meanwhile, reversal from current resistance now seems to find immediate support at 20-hourly SMA near 1.2945-40 region, below which the pair could be headed back below 1.2900 handle to test 1.2875-70 horizontal support. A convincing break below 1.2875-70 support now seems to open room for continuation of the pair’s strong bearish momentum, even below Wednesday’s swing lows support near 1.2800 round figure mark.”