- The portion of orders to acquire the British rose up to 67%
- Market sentiment remains bullish at 54%
- The nearest resistance is located around 1.4530
- Rising support line and the 55-day SMA form support circa 1.44
- 57% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: US Labor Market Conditions Index, Fed Chair Yellen Speech, UK Halifax HPI, US Revised Nonfarm Productivity, US Consumer Credit
On Friday and over the weekend the British currency weakened across the board, with the only exception being the Cable. Rather serious declines of 1.49%, 1.44%, 1.24% and 1.18% were registered against the Yen, the Kiwi, the Euro and the Aussie, respectively. However, the third commodity currency, namely the Loonie, somewhat struggled to outperform the Sterling, as the GBP/CAD dropped only 0.58% lower. At the same time, the Cable surged 0.66%, amid an overwhelmingly disappointing US NFP reading on Friday.
The United Kingdom May services purchasing managers' index rose more than expected, rebounding from a three-year low in April, which signalled increasing optimism over the health of the British economy. A report of market research group Markit showed that the situation with UK services PMI was more upbeat than expected with 53.5 points growth from 52.3 in April, while economists had forecast a score of 52.5. Activity has risen every month since January 2013 and the latest rate of growth was the slowed seen over the past three years. Services make up for almost 80% of the total gross domestic product, data showed, and this were the good news from the biggest sector in the UK despite the upcoming EU Referendum. Moreover, data remained well above the 50-point mark, indicating an expanding economy. Expectations for activity over the next 12 months strengthened despite the slowest gain in new business in the current 41-month sequence, and were contingent on the outcome of the June 23 EU membership referendum.
Nevertheless, despite the better-than-expected PMI figure, research group Markit has warned markets of a possible surprise following the June 23 Brexit referendum on the UK's membership in the European Union. Markit also highlighted that it was the slowest gain in new business in the 41-month growth sequence and that hiring was at a 33-month low.
Focus on Yellen's speech
Even though there are no significant economic data releases to have an impact on the Cable today, Yellen's speech could still drive the pair rather significantly. As head of the central bank, she has more influence over the nation's currency value than anyone else. She is scheduled to speak today at 16:30 PM GMT.
GBP/USD to retest the up-trend
Amid devastating US NFP data on Friday, the GBP/USD currency pair soared, reconfirming the three-month up-trend. Nevertheless, the Cable opened with a bearish gap today and with the bearish momentum taking the upper hand, as the ‘Brexit' fear is back. Technically, the exchange rate should find support around the 1.44 major level, where the 55-day SMA coincides with the earlier-mentioned up-trend. Meanwhile, technical studies are giving mixed signals, suggesting that a close beyond the immediate support cluster is doubtful, despite volatility stretching further.
Daily chart
Once the GBP/USD pair reached the 200-hour SMA on Friday, momentum began to fade, resulting in a bearish gap and an early drop today. The up-trend is expected to provide sufficient support and help the Cable negate the early intraday losses or at least to limit them.
Hourly chart
Bulls and bears remain in balance
Market sentiment remains unchanged at 54% since Friday, whereas the portion of orders to acquire the British currency added 18 percentage points, having risen up to a total of 67%.
There are also slightly more bulls at OANDA - they take up 56% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is close to being neutral as well, but here the number of bulls exceeds the number of bears by four percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
The majority of traders (57%) believe the British currency is to cost 1.46 or more dollars after a three-month period. The most popular price interval was selected by slightly less than a fifth (16%) of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Sterling is to cost either between 1.42 and 1.44 dollars, or between 1.44 and 1.46 dollars, or between 1.48 and 1.50 dollars or even between 1.52 and 1.54 dollars in three months, all chosen by 13% of the surveyed. At the same time, the mean forecast for Sep 06 is 1.4661.