GBP/USD: Rebound remains capped below 1.1800 amid mixed UK PMIs, bear cross

• GBP/USD whipsaws after UK services PMI improves but manufacturing PMI contracts.
• The US dollar maintains the pullback amid cautious optimism, weaker Treasury yields.
• Bear cross remains in play, as GBP bears eye a daily close below critical 1.1760 support line.

GBP/USD is struggling once again to extend the recovery while holding below the 1.1800 level, as bears remain unconvinced by the mixed UK Preliminary Business PMI surveys.

While activity in the services sector remained near July's 52.6, the manufacturing component tumbled to 46.0 in August from 52.1 in July, its lowest since May 2020.

Although a minor improvement in risk sentiment after an upside surprise delivered by the German Preliminary PMI eases fears over an imminent recession and lifts the European stocks. This helps the higher-yielding GBP to hold its ground against the US dollar.

The greenback pulls back from close to 19-year highs amid a sell-off in the US Treasury yields across the curve. Investors also book profit on their USD longs after the recent relentless rise and ahead of a fresh batch of relevant US economic data. The US S&P Global Preliminary manufacturing and services PMIs will be reported in the NA session, followed by the New Home Sales release.

Despite the renewed upside, cable remains vulnerable, as the state of the UK economy remains dire amid surging inflation, the European gas crisis and political concerns.

As observed on cable’s daily chart, the price is clinging to the critical support line at 1.1760. A daily closing below the latter is required to cement the ongoing downtrend towards the falling trendline support at 1.1565.

Ahead of that, 1.1600 – the round figure will challenge the bullish commitments. The 14-day Relative Strength Index (RSI) has stalled its descent but sits just above the oversold territory, suggesting that the downside remains more compelling.

Further, the 21-Daily Moving Average (DMA) has cut the 50 DMA from above, representing a bear cross and adding credence to the bearish potential.

GBP/USD: Daily chart

If buyers manage to take out the 1.1900 round figure, then a retest of Monday’s high at 1.1838 cannot be ruled.

Fresh buying opportunities will emerge above the latter, exposing the psychological barrier at 1.1850.

GBP/USD: Additional technical levels