GBP/USD: Upbeat UK PMI-led rally stalls near 1.3665, eyes on US ADP, Fed

• A big beat on the UK construction PMI supports Cable’s recovery.
• Will the relief rally sustain ahead of the US ADP, FOMC outcome?

The GBP/USD pair extended its rebound from four-month lows of 1.3581 following the release of better-than-expected UK construction PMI data, although the bulls have started getting nervous, as attention now shifts towards the US ADP jobs report and FOMC decision.

However, unwinding of the long dollar trades combined with upbeat UK construction sector data will continue to offer some respite to the GBP bulls, especially after having suffered steep so far this week on dwindling May BOE rate hike expectations and UK politics/ Brexit concerns.

Should the FOMC statement offer fresh hints on a June rate hike, the USD bulls are likely to regain control, knocking-off the rates back towards the 1.3457 Jan low. In case of a dovish surprise from the Fed, the relief rally in the spot will gain further traction, pushing the pair back onto 1.37 handle.

GBP/USD levels to watch

Slobodan Drvenica at Windsor Brokers notes: “Bears may take a breather on oversold conditions and could accelerate if UM Construction PMI comes in line/above forecast (Apr 50.5% f/c vs 47.0 prev), but strong bearish structure suggests limited recovery before bears resume. Strong supports at 1.3550 (Fibo 61.8% of 1.3038/1.4376) and 1.3530 (rising 200SMA) are in focus and break here would generate fresh bearish signal. Res: 1.3650; 1.3711; 1.3772; 1.3792. Sup: 1.3580; 1.3550; 1.3530; 1.3500.”