- 53% of all pending orders are still to sell the Pound
- 51% of all open positions are long
- Strong resistance is around 1.29
- Significant support rests circa 1.2850
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Upcoming Events: US Services PMI, US Factory Orders, US Labor Market Conditions Index, US Non-Farm Productivity
Construction activity rose at the fastest pace since the end of 2015 last month, a private survey showed on Friday. Markit/CIPS reported that its Purchasing Managers' Index for the UK construction sector came in at 56.0 in May, following the preceding month's 53.1. Meanwhile, market analysts anticipated a decline to 52.7 points during the reported month. The construction sector accounts only for about 6% of the UK economy.
Nevertheless, May's construction and manufacturing PMI survey suggested that the economy gained positive momentum in the second quarter. Friday's data showed that housebuilding climbed at its fastest pace since December 2015, with commercial construction rising at the strongest rate since March 2016. Markit also highlighted that British builders employed more people and ordered more raw materials to cope with surges in order inflows. Despite the stronger-than-expected PMI for both construction and manufacturing sector, Monday's release of the PMI for the services sector will provide a clearer picture of the British economy, as services activity accounts for about 70% of the economy.
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US Services PMI is the most important event today
Monday is not rich in terms of fundamental data, but some important events are still due, such as the US Non-Farm Productivity. It shows the output per hour of labor worked and indicates the overall business health in the US, which has an influence on the GDP. However, this release is likely to be overshadowed by the US Services PMI, which is released by both the Markit Economics and the Institute for Supply Management. Services PMI captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the given PMI is an important indicator of the overall economic condition in the US. Finally, the Factory Orders. They are a measure of the total orders of durable and non-durable goods, such as shipments, inventories and orders at the manufacturing level, which can offer insight into inflation and growth in the manufacturing sector.
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GBP/USD to attempt to reclaim 1.29
Friday ended with the Cable edging moderately higher, amid the disappointment brought by the US NFP data. The rally caused another confirmation of the two-week down-trend, which now acts as the resistance line of a triangle pattern. This pattern is nearing its apex, with a breakout to occur by mid-Tuesday. The lower border of the triangle is much stronger, as it is a support line of a much larger pattern—the broadening rising wedge. Moreover, it is supported by a larger number of significant levels than the down-trend. Technical indicators are also in favour of the bullish scenario, thus, the GBP/USD pair is likely to take another shot at climbing over the 1.29 mark this week and pierce the resistance around that area, which is represented by the monthly pivot point.
Hourly chart
On the daily chart the Cable's outlook also seems bearish, as there are two wedges present simultaneously, both are rising ones, thus, implying a downside breakout. The normal wedge is bound to reach its apex sooner than the broadening one, assuming their common support lines holds that long. Ahead of the upcoming elections in the UK it is difficult to be certain the patterns will would last more than a week.Daily chart
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Bearish sentiment still prevails
Market sentiment is still neutral, as 51% of all open positions are long. At the same time, there are still 53% of all pending orders set to sell the Pound.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 60% of all open positions are short and the remaining 40% are long. Meanwhile, sentiment at Saxo Bank is also bearish, with 62% of traders now being short and the other 38% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
© Dukscopy Bank SATraders believe the Cable is to rise above the 1.30 major level by the end of the next three months, as 56% of survey participants share this belief. While the current price is around 1.29, the average forecast for September 05 is 1.297. The 1.34-1.36 range is now the most popular price interval, having 23% of the votes, while on the second place is the 1.20-1.22 interval, with 16% of the voters choosing it.