GBP/USD in limbo around 1.4250

Source: Dukascopy Bank SA
  • The share of purchase orders slid from 55 to 53%
  • 69% of traders are now long the Pound
  • Main resistance is around 1.4280
  • The nearest support the up-trend at 1.4260
  • 69% of traders reckon GBP/USD will be at 1.44 or lower in three months
  • Upcoming events: UK Services PMI, US Trade Balance, US Final Services PMI, US ISM Non-Manufacturing PMI, US JOLTS Job Openings
© Dukascopy Bank SA

The British currency appreciated against most major peers on Monday, with the only exception against the Yen. The Sterling gained the most against the commodity-based currencies, such as the Kiwi, the Aussie and the Loonie, adding 1.25%, 1.20% and 0.86%, respectively. Other mild gains were registered versus the Swissie (0.35%), the Euro (0.30%) and the US Dollar (0.26%). The Pound, however, remained relatively unchanged versus the Japanese Yen, but edged 0.05% lower against it.

The housebuilding activity in Britain remained steady in March, against economists' expectations for a slight drop. The Markit/CIPS construction PMI stood at 54.2 last month, unchanged from February's 10-month low. The gauge marked the 35th month in a row of growth, but indicated the slowest rate of output growth since June 2013. Although there was a recovery in commercial and civil engineering work in March, Markit reported that the rebound was offset by the residential housing sector, which recorded the weakest pace of growth since January 2013 despite efforts by the government to spur more housebuilding. Construction companies were more cautious over hiring last month, with the rate of employment growth falling to the slowest rate since June 2013. Moreover, 51% of survey respondents said they anticipate an increase in business activity at their units over the next 12 months, while only 11% forecast a slowdown. However, while this signalled that UK construction companies remain sanguine about their prospects for growth, the overall degree of confidence was the joint-lowest since December 2014.

UK GDP growth for the fourth quarter was revised up to 0.6% from a previous estimate of 0.5%. However, more recent data has pointed to a decline in the pace of expansion in the first three months of 2016.


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UK Services PMI, US Trade Balance and US Services PMI



Tuesday also brings a set of data both from the UK and the US. First of all, the UK Services PMI due at 9:30 AM GMT. The Services PMI, released by both the Chartered Institute of Purchasing & Supply and the Markit Economics, 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, the Trade Balance figures are expected to be released later today. The Trade Balance, released by the Bureau of Economic Analysis and the U.S. Census Bureau, 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. And finally, the US Services PMI, released by both Markit Economics and Institute of Supply and Management. It captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in US.



GBP/USD in limbo around 1.4250

On Monday the GBP/USD currency pair reconfirmed the six-week up-trend, but recovering from its intraday low and edging over the 1.43 level. However, the Cable was unable to maintain trade that high, with trade ultimately closing just on top of the monthly PP. Resistance remains strong today, but more USD weakness could push the pair higher and once again over the 1.43 mark. On the other hand, supply just above today's opening price might cause the exchange rate to drop back towards the up-trend, with a chance of the 1.42 psychological level being pierced if fundamentals turn in the Buck's favour.

Daily chart

© Dukascopy Bank SA

The Sterling appreciated again on Monday, but was unable to edge above the resistance line near 1.43. Moreover, a newly-arisen support line appears to be strong enough to keep GBP/USD elevated. Another confirmation today is required to fully establish the up-trend, unless a breach towards the March 16 low at 1.4050 takes place.

Hourly chart

© Dukascopy Bank SA



Sentiment turns bullish

Bullish market sentiment grew stronger over the past 24 hours, as 69% of traders are now long the Pound (previously 65%). The share of purchase orders, however, slid from 55 to 53%.

Concerning the sentiment of other market participants, OANDA still has a bullish sentiment of 54%, compared to 53% on Monday. Meanwhile, the sentiment at Saxo Bank worsened over the day, with 55% of all open positions now being short, compared to 52% on Monday.














Spreads (avg, pip) / Trading volume / Volatility



Majority sees GBP/USD below 1.44 in three months

© Dukascopy Bank SA

The majority of traders (69%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The most popular price interval was selected by 18% of the voters, namely the 1.38-1.40 one, while the second most popular choice implies that the Pound is to cost between 1.46 and 1.48 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for July 05 is 1.417.

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