- The portion of orders to acquire the British currency takes up 48% of the market
- 58% of all open positions are now long
- The weekly PP forms resistance at 1.4563
- Support is around 1.4440, represented by the weekly S1 and the monthly PP
- 60% of traders reckon GBP/USD will be at 1.44 or higher in three months
- Upcoming events: UK Services PMI, US Jobless Claims, FOMC Member Bullard Speech
The British Pound was unable to post significant gains against other major currencies, due to a poor reading of the UK Construction PMI data. Nevertheless, the Sterling managed to add 0.87% against the Canadian Dollar, amid the Canadian Trade Balance figures disappointing yesterday. Mild gains of 0.22%, 0.11% and 0.10% were registered versus the Kiwi, the Aussie and the Japanese Yen, respectively. Meanwhile, the Pound remained relatively unchanged against the Swiss Franc, up only 0.06%, followed by a 0.18% loss against the Euro and 0.27% versus the American Dollar.
The UK's construction output rose at the slowest pace in nearly three years in April, suggesting the economy was losing steam before June's referendum on whether to leave the European Union. The Markit/CIPS PMI gauge of business activity within Britain's construction sector fell to 52 last month from 54.2 in March, and considerably below economists' median forecast of 54.Even though the headline PMI figure remained above the key 50-mark threshold for the 36th straight month in April, its level has weakened notably from post-crisis highs seen in 2014. Both business activity and new work declined in April, and subdued demand conditions led to employment levels also falling to a three-year low.
Britain's economy slowed in the first quarter as the global economy weakened. Recent data have suggested it is losing more steam as the June 23 EU vote looms. The UK manufacturing sector encountered a surprise contraction in April that reflected in the PMI, as it entered negative territory for the first time in four years, plummeting under the 50 point mark to show 49.2 points. Market participants will now be closely watching the PMI survey on the services sector due later in the day, which is expected to show that activity declined slightly to 53.5 at the beginning of the second quarter, following a dramatic decrease to a three-year low overall in the first quarter of this year.
UK Services PMI and US Initial Jobless Claims
Today focus should be on the UK Services PMI, which is released by both the Chartered Institute of Purchasing & Supply and the Markit Economics. It 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. Traders want the highest possible reading as that will be taken as positive for the GBP. From the US side, the Initial Jobless Claims are due. The Jobless Claims are released by the US Department of Labor and are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy.
GBP/USD on the edge of falling under 1.45
Despite a weak reading of the US ADP Non-Farm Employment Change yesterday, the Cable still edged lower, but managed to close on top of the 1.45 major level. The Sterling is now likely to rebound, with the nearest resistance located at 1.4563, represented by the weekly PP. Even though technical indicators are bolstering the possibility of the positive outcome, risks of the GBP/USD currency pair inching lower persist if the UK's services sector data disappoints today. In case the bearish development prevails, the nearest area to prevent the Pound from falling lower will be the cluster around 1.4450.
Daily chart
Another day full of disappointment yesterday caused the Cable to reach the lowest level in more than a week. It is uncertain whether the GBP/USD pair will be able to continue recovering towards the resistance trend-line around the 1.49 mark, or if the bears will manage to push the pair under the 1.45 level, as the long-term bearish trend remains intact.
Hourly chart
Bulls now in the majority
Bulls grew stronger today, as 58% of all open positions are now long (previously 54%). At the same time, the portion of orders to acquire the British currency barely changed, now taking up 48% of the market.
At OANDA market sentiment no longer remains in a perfect equilibrium, as 52%% of their open positions are short. Meanwhile, the sentiment at SAXO Bank also edged closer to equilibrium, with 53% of their traders holding short positions (previously 51%).
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.44 in three months
The majority of traders (60%) believe the British currency is to cost 1.44 or more dollars after a three-month period. The most popular price interval was selected by slightly more than a quarter (31%) of the voters, namely the 1.44-1.46 one, while the second most popular choice implies that the Sterling is to cost between 1.46 and 1.48 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for May 05 is 1.439.
Dukascopy Community members, however, have mostly bearish perspective while the consensus forecast stands for 1.44-mark, still above last week's average price of 1.42. Furthermore, equal number of respondents are having bullish and bearish views on the pair.
Among the bullish traders, edlim suggests that "currently, price found resistance at 1.4640 and could consolidate closer towards 1.4500. Month-to-date, price is still making higher highs and lows."
Meanwhile, megajorko believes that the Cable is to edge lower by week's end, suggesting that "Even after the strong bullish momentum cable has still uncertainties about eventual Brexit." "After the US dollar gaining force it will be very strange if the pair goes up. I do not see any other major news next week so a price between present 1.44 and 1.4 (50% )", he added.