- The number of orders to acquire the Sterling, however, slid from 59 to 56%
- Bulls keep prevailing over bears, as 59% of all positions are long today (previously 58%)
- 18% of traders assume the Sterling will cost between 1.60 and 1.62 dollars in three months
- The nearest resistance is located around 1.56, the monthly PP
- Immediate support, represented by the 55-day SMA, lies at 1.5536
- Upcoming events today: US Markit Services PMI, US ISM Non-Manufacturing PMI, US Labor Market Conditions Index
The UK Pound suffered more losses than experiencing gains over Friday and the weekend. Losses of 0.56%, 0.49% and 0.48% were detected against the Swissie, the Euro and the Yen, respectively, following with a lesser 0.25% decline versus the Greenback. However, the Sterling received a huge gain versus the Aussie (1.26%) and a smaller one of 0.25% versus the Kiwi. Furthermore, the British currency remained relatively unchanged against the Loonie, adding only 0.08%.
Activity in the UK services sector rose more than expected last month, suggesting the UK economy picked up momentum going into the second half of the year. The Markit/CIPS services PMI climbed by 2 points in June to 58.5, overshooting economists' forecast and staying firmly above the 50-mark threshold that separates growth from contraction. The breakdown of the upbeat PMI data sent some mixed signals. British services companies took on staff at the slowest pace this year, while new orders also increased at the weakest pace so far in 2015. However, businesses' optimism about the coming year held virtually unchanged at a high level.
Combined with manufacturing and construction data earlier this week, Markit said Britain's economy was likely to expand around 0.5% from April through June, compared with 0.4% in the first quarter. However, the recovery looks increasingly imbalanced, as growth in the country's manufacturing sector declined to the lowest level in more than two years in June. The UK manufacturing PMI for June dipped to 51.4, from 51.9, while economists had been expecting a further advance to 52.5. The strong Pound, sluggish demand from the Euro zone, where the Greek debt crisis is sapping demand is hampering the British economy.
Paul Bednarczyk, head of research at 4CAST, is optimistic with respect to the world's largest economy over the coming months, saying that "we should be seeing some better US numbers coming through," which will lead the Cable to 1.54. Meanwhile, the analyst considers that "over the next three months Sterling will perform well on a trade-weighted basis," but GBP/USD is still likely to decline to 1.4850. In the longer-term perspective, Bednarczyk is also bearish, setting his 12-month forecast at 1.42, which will be a story of Dollar strength rather than Sterling weakness.
US ISM Non-Manufacturing PMI
With no significant data releases on the UK economy, the only relevant ones remain from the US, with the most important one being the ISM Non-Manufacturing PMI. The index is forecasted to rebound, after the service sector activity slowed more than anticipated in May. A rise of the index is likely to mean an increase in the stock markets because of higher corporate profits, while the bond markets could decrease, amid sensitivity to potential inflation. Nonetheless, if the figures manage to meet expectations or surpass them, the US Dollar should further appreciate versus the Sterling.Ross Walker, economist at Royal Bank of Scotland Group, suspects that GBP/USD may descend to 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross mentioned that "the main driver in many ways, as well as the main support in recent times, have been the expectations that the Bank of England will raise interest rates at some point next year, probably the beginning 2016."
GBP/USD anchored around 1.5550
Despite better-than-expected UK fundamental data, the Cable still sustained losses at the end of last week. The strong support cluster around 1.56 was breached, as the pair extended its bearish two-week trend. The British Pound is expected to experience more weakness today and fall down to either around 1.55 or 1.5477, where the lower Bollinger band rests. Nonetheless, a possibility of a surge remains, but the earlier mentioned barrier, which is now providing resistance, will be hard to penetrate.
Daily chart
On the hourly chart, the GBP/USD was seen experiencing a small rally after the fundamental data release, but upon reaching 1.5645, the sharp decline led the exchange rate all the way down to 1.5554. The situation is stabilising for now, but in the second half of the day the Greenback is expected to weigh on the Pound and force it fall even deeper to 1.55.
Hourly chart
Bears prevailing over bulls
Bulls keep prevailing over bears, as 59% of all positions are long today (previously 58%). The number of orders to acquire the Sterling, however, slid from 59 to 56%.
Although slightly weaker, but other market participants have a bearish outlook towards the Cable. The SAXO Group's sentiment slightly improved, but, nonetheless, remains bearish, as 59% of their traders hold short positions. Meanwhile, bears are also growing stronger among OANDA's traders, with 53% of them holding short positions.
Spreads (avg, pip) / Trading volume / Volatility
18% of traders assume the Sterling will cost between 1.60 and 1.62 dollars in three months
The survey participants have high expectations concerning the Cable, as the majority of them, namely 69%, assume the Sterling will cost more than 1.54 dollars after three months. Nevertheless, the most popular choice remains the 1.60-1.62 interval, selected by 18% of the voters. The 1.50-1.52 price interval now has only 14% of participants voting for it. According to the survey conducted between June 06 and July 06, the mean forecast for October 06 is 1.5768.