GBP/USD - Is the bond yield spread positioned for strong UK PMI?

Higher low - Cable’s sharp recovery from the low of 1.2852 yesterday has left a higher lows pattern on the daily chart. The spot closed at 1.2929 and extended gains to a high of 1.2947 in the Asian session today. 

CBI, business lending points to strong UK PMI release

UK Aug manufacturing PMI due at 08:30 GMT is expected to show the pace of expansion in the activity remained largely unchanged at 55.00 levels. 

The CBI monthly Industrial Trends Survey published on Aug 22 showed the demand remained robust for manufacturers in August. Meanwhile, the data released earlier this week showed a jump in business loans in July. The manufacturers may be finally witnessing the benefits of the weak Pound [as per J-curve theory]. 

Thus, a better-than-expected manufacturing PMI cannot be ruled out. Strong data would lift the British Pound. 

US-UK 10-yr yield spread - Positioned for strong UK data

• The chart above shows a potential head and shoulders formation and falling tops. 
• The spread, thus looks set to extend losses [narrow in favor of the British Pound]. 

GBP/USD Technical Levels

A break above 1.2967 [50-DMA] would expose 1.30 [psychological level], above which a major hurdle is seen at 1.3032 [Aug 11 high]. On the downside, breach of support at 1.2910 [100-DMA] would open doors for a sell-off to 1.2852 [previous day’s low] and 1.2831 [Aug 18 low].