- The number of orders to sell the Pound edged higher from 45 to 71%
- 66% of all open positions are long
- The nearest resistance is located at 1.3090
- Support is at 1.2899
- 52% of traders reckon GBP/USD will be at 1.40 or higher in three months
- Upcoming events: US Trade Balance, US Services PMI, FOMC Meeting Minutes
Service-sector activity in the UK surprisingly decelerated in June, a private survey from Markit Economics reported. Markit's services purchasing managers' index released today fell to 52.3 in June from 53.5 in May. The market expectation was for an index reading of 52.7. It remains in a territory above 50 points, which indicates expansion in the industry, while below 50.0 indicates contraction. The closely watched gauge was at its lowest level since April. Growth over the second quarter was the lowest since the first quarter of 2013, averaging 52.7. The index has averaged 55.2 since it was first compiled in July 1996. The outlook for the year was the darkest since December 2012, according to Markit. Companies said uncertainty linked to the EU referendum had weighed on workloads and incoming new business.
Recent data showed, that both manufacturing and services sector activities in the UK have been under pressure as Brexit-related uncertainty darkened the outlook for businesses. Accordingly, the BoE's Monetary Policy Committee is scheduled to meet on Thursday next week on July 14. Some market analysts are predicting a pre-emptive interest rate cut in order for the BoE to curb uncertainty and promote economic activity.
US Services PMI, US Trade Balance and FOMC Meeting Minutes
Among important fundamental events today the US Services PMI and the US Trade Balance are due. The Trade Balance is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the USD. The US Services PMI is released by both the Markit Economics and the Institute for Supply Management, captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicators of the overall economic conditions in US. However, the most important event will be the FOMC Meeting Minutes. FOMC stands for the Federal Open Market Committee, that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate.
GBP/USD risks sustaining sharper losses
Due to BoE governor's statement on Tuesday the Sterling weakened substantially, breaching the 1.3230 support level and slumping down to the 1.30 major level. Even though technical indicators are giving mixed signals today, the Cable remains subject to more weakness. The weekly S2 at 1.2899 is the closest support today, but a much stronger cluster is located around 1.2660, represented by the weekly S3, the monthly S1 and the Bollinger band. However, we should not rule out the possibility of the Pound regaining the bullish momentum, amid a dovish Fed statement, which is scheduled for today.
Daily chart
The hourly chart shows that the Sterling retains its weakness, as it was unable to climb over the one-week down-trend yesterday, but only edged lower after putting it to the test. The 200-hour SMA is now even closer to the trend-line, bolstering the resistance around that area, thus, a breakout to the upside is highly unlikely.
Hourly chart
Bulls remain in control
There are 66% of all open positions being long today (previously 68%), while the number of orders to sell the Pound edged higher from 45 to 71%.
Compared to Monday, there are also slightly more bulls at OANDA - they take up 57% of the positions open with the Canada-based broker. Sentiment at Saxo Bank turned bullish, as here the number of bulls exceeds the number of bears by 10 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.40 in three months
More than half of traders (52%) believe the British currency is to cost 1.40 or more dollars after a three-month period. The most popular price intervals was selected by slightly less than a fifth (13%) of the voters, namely the 1.28-1.30 one, while the second most popular choice implies that the Sterling is to cost either between 1.36 and 1.38 dollars or between 1.40 and 1.42 dollars in three months, both chosen by 12% of the surveyed. At the same time, the mean forecast for Oct 06 is 1.40.