- The number of sell orders increased from 46 to 70%
- 60% of traders are short the GBP
- The nearest resistance is located around 1.4155
- Immediate support rests at 1.4012
- 62% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Services PMI, US Jobless Claims, US Revised Non-Farm Productivity, US Final Services PMI, US ISM Non-Manufacturing PMI, US Factory Orders, US Natural Gas Storage
With no certain news concerning the Brexit, investors took long Pound positions, pushing the Sterling-crosses higher. The British currency posted solid gains of 0.95%, 0.91%, 0.90% and 0.83% against the Loonie, the Euro, the Greenback and the Swissie, respectively, whereas the GBP/JPY managed to appreciate only 0.43%. The Pound was not so lucky with its performance against the remaining commodity currencies, namely the Aussie and the Kiwi. A rally of only 0.21% was registered against the New Zealand Dollar, while the GBP/AUD dropped 0.76% lower, amid stronger-than-expected Australian GBP data.
Business activity in Britain's construction sector unexpectedly slowed to the lowest level in ten months in February, but remained firmly in expansion territory for the 34th month in a row. The Markit/CIPS UK construction PMI declined to 54.2 in the reported month, down from 55.0 in January, compared with economists projection of 55.5. Housebuilding rose at the slowest pace since June 2013, when the UK economy started to recover, while construction firms hired staff at the weakest rate since August 2013. Optimism among companies about business activity for the year ahead dropped to the lowest level since December 2014. The latest official data showed construction output dropped in the fourth quarter of 2015, and remained 4.1% below the pre-crisis peak. Despite a weaker final quarter, and high volatility in the sector, construction sector performance improved throughout 2015 compared with the preceding year.
The data followed the manufacturing PMI report, which showed manufacturing growth declined to near a three-year low in February due to a drop in new orders. Markit factory index declined to 50.8 last month, down from 52.9 in January, marking the lowest level since April 2013. Markets will now await fresh PMI data on the services sector due on Thursday. Expectations ahead suggest activity slowed slightly in February.
UK and US Services PMIs
The UK keeps shooting out PMI data today, as the Services PMI economic data release is due. The Services PMI is released by both the Chartered Institute of Purchasing & Supply and the Markit Economics, it is an indicator of the economic situation in the UK services sector. It captures an overview of the condition of sales and employment. It is worth noting that the UK service sector does not influence, either positively or negatively, the GDP as much as the Manufacturing PMI does. Concerning the US economy, also the Markit and ISM Services PMIs are scheduled for today. In both countries the PMIs are expected to worsen, but UK's, nonetheless, to remain above the 50.0 mark, meaning that the industry is still expanding.
GBP/USD has the potential to retake 1.41
The GBP/USD currency pair surprised with its performance on Wednesday, amid no further clues concerning the Brexit. As a result, the Cable surged 125 pips and reached a new one-week high, but uncertainty remains in the market. The Pound still risks edging lower, as technical studies in all timeframes retain bearish signals. The weekly PP now acts as the closest support, although a sharper decline is possible, without, however, stretching beyond the 1.3830 mark—where the down-trend lies. On the other hand, the Sterling could prolong its rally if fundamentals support it, and even pierce the nearest resistance, namely the monthly PP and the weekly R1 around 1.4155.
Daily chart
The 200-hour SMA failed to bolster the channel's resistance line, causing the GBP/USD to rise to what was the lowest level in January. However, the pair appears to be struggling to maintain the bullish momentum and climb over the 1.41 major level; therefore, the exchange rate could retreat towards the 200-hour SMA, which is located at 1.40.
Hourly chart
Three brokers - three sentiments
Market sentiment shifted to the bearish side, with 60% of traders being short the GBP. The number of sell orders increased from 46 to 70%.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 57% of them are long, unchanged since Tuesday. At the same time, among Saxo Bank traders bulls remain in the majority: 57% of their open positions are long and the other 43% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (62%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price interval was selected by 18% of the voters, namely the 1.36-1.38 one, while the second most popular choice implies that the Pound is to cost between 1.48-1.50 dollars in three months, chosen by 15% of the surveyed. At the same time, the mean forecast for June 3 is 1.4338.
This week's participants of Dukascopy quiz became much more bearish on pair's perspectives, as now 71.4% of all votes are short, while the average prediction is located on the weekly pivot point at 1.382.
Among the 29% of traders with a positive outlook towards the Cable, Eco believes that "the pair has already tested the bad news and the strength to rebound".
At the same time, a traders with a negative outlook, namely RacerX, suggests that uncertainty about the UK's upcoming referendum to stay or leave the EU is raising volatility with the Sterling. "Brexit fears are likely to weaken GBP/USD," he commented.