GBP/USD is moving closer to testing the top of the rising channel on the 1-hour time frame, although the pair seems to be retracing at the moment. 

Weak U.S. data has been propping up this pair so far, and it remains to be seen whether the upward momentum can be sustained.

The U.K. will be printing its PMI figures for services, manufacturing, and construction later on in the week and slight pullbacks are expected for all industries. Traders could start pricing in negative expectations as early as today and these could weigh on the pound.

Take note though that stochastic is in the oversold region, suggesting that pound bulls might take charge soon. If that’s the case, GBP/USD could test the channel resistance around 1.5550 to 1.5650. If that area holds as resistance, GBP/USD could be on its way back down to the 1.5200 mark.

An entry around 1.5600 with a 100-pip stop and a 300-pip profit target would be a 3:1 trade.

By Kate Curtis from Trader’s Way