- Most traders plan to sell the Pound, namely 62%
- Still no distinguishable difference between the bulls and bears
- 1.3340 is a potential daily target
- 1.3200/1.3180 is the floor
- 59% of traders reckon GBP/USD will be at 1.30 or lower in three months
- Upcoming events: US Core PCE Price Index, US Personal Spending
The activity of manufacturing sector in the UK economy surprised to the downside during the previous month, slipping into the contraction territory, since Brexit-related uncertainty had a great effect on the UK factory sector. The manufacturing sector dropped at the fastest pace in three years as factories were forced to cut jobs due to higher costs and lower demand. According to the latest report conducted by market research group, the UK manufacturing PMI dropped to a seasonally adjusted 48.2 mark in July from a reading of 52.1 in June. Meanwhile, a reading above 50.0 indicates industry expansion, while below, in turn, means contraction. Companies reported uncertainty over the outcome of the 23 June Brexit referendum vote being weighed its performance after a one month. Moreover, job losses in the industry were also running at their second-highest level in more than three years.
In the meantime, news that the slide in manufacturing activity in July was steeper than first thought cemented a view that the Bank of England will cut interest rates this week in order to give a support to business and consumer spending.
Construction PMI today, services PMI tomorrow
Tuesday's main event for GBP/USD was the construction PMI, a monthly measure of dynamics in business conditions in the UK construction sector. And although today's release was noticeably better than the expectations (45.9 instead of 44.2), it still indicates contraction. Afternoon trading, however, is to be dominated by the US news. Their impact is unlikely to be particularly strong, but given a strong surprise in the numbers, both PCE price index and personal spending have the potential to move the price before the mains events of the week.
GBP/USD ready to break out
The Cable is currently trading right at the apex of the symmetrical triangle it has been forming since June 26. The pattern itself implies a bearish breakout due to a strongly negative reaction to the results of the ‘Brexit' vote. The downward bias is also reinforced by the technical indicators. However, the breakout will primarily depend on the upcoming news releases rather than on the technicals, of which we will have plenty this week. More ambiguity is added by the fact that the pair has already reached the lower bound of the multi-year descending channel, which in turn implies a bullish correction to 1.40.
Daily chart
In the hourly chart the British Pound appears to be rather strong. GBP/USD is at the lower bound of the recently established channel, and this support is reinforced by the 200-hour SMA. Accordingly, the risks for today are skewed to the upside, with 1.3200/1.3180 being the floor and 1.3340 being the potential target.
Hourly chart
Sentiment from neutral to bullish
The market remains undecided, as there is still no distinguishable difference between the numbers of bulls and bears in the market—51 and 49%, respectively.
Elsewhere being long the Pound is more popular, but only by a narrow margin. Both at OANDA and Saxo Bank 56% of traders are holding long positions, up from 54 and 53% respectively.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.30 in three months
More than half of traders (59%) believe the British currency is to cost 1.30 or less dollars after a three-month period. The two most popular price intervals were selected by 25% of the voters each, namely the 1.24-1.26, while the second most popular choice implies that the Sterling is to cost between 1.28 and 1.30 dollars in three months, chosen by 19% of the surveyed. At the same time, the mean forecast for Nov 01 is 1.307.