- The portion of orders to purchase the British currency edged lower from 67 to 45%
- 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 1.4410
- 56% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Halifax HPI, US Revised Nonfarm Productivity, US Consumer Credit
The Sterling continued to decline against most major currencies this week, as on Monday it managed to outperform only one other currency, namely the Yen. Commodity currencies, such as the Loonie and the Aussie, managed to add 1.44% and 0.57% against the Sterling, respectively, whereas the GBP/NZD inched only 0.07% lower. Another serious decline of 1.08% was registered against the Swiss Franc, mostly driven by fears of Britain leaving the EU on its referendum in June. However, the GBP/JPY cross succeeded in edging 0.42% higher on Monday, being the only Sterling pair among majors to close in the green zone.
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.
US Non-farm Productivity and Consumer Credit
Among important economic data releases the most important one to influence the GBP/USD pair today is the US Non-farm Productivity. It is released by the Bureau of Labor Statistics and shows the output per hour of labour worked. Non-farm Productivity indicates the overall business health in the US, which has an influence on GDP. Another event to focus on is the US Consumer Credit, which is released by the Board of Governors of the Federal Reserve. It is an amount of money that individuals borrowed, shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond that means.
GBP/USD attempts to climb over 1.45
The Sterling succeeded in preserving the ascending channel's support line yesterday, having closed with only a 31-pip slump. Nevertheless, there has been a more than 200-pip spike in the GBP/USD pair earlier today, being driven by unknown circumstances. This surge provides a great selling opportunity, thus, the bearish momentum could soon prevail. The Cable still faces a strong resistance cluster around 1.4535, formed by the 20-day SMA, the weekly and the monthly PPs. From below the channel's trend-line is providing support along with the 55-day SMA, a breach of which today is unlikely to occur.
Daily chart
The 200-hour SMA remains a strong resistance even this week, as seen on the hourly chart, it prevented the pair from edging higher after today's sudden surge. Consequently, it could lead to more downward pressure, with the support trend-line holding the losses.
Hourly chart
Bulls and bears remain in balance
For the third time in a row market sentiment remains bullish at 54%. At the same time, the portion of orders to purchase the British currency edged lower from 67 to 45%.
There are also slightly more bulls at OANDA - they take up 60% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is still close to being neutral, but here the number of bulls exceeds the number of bears by six percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
The majority of traders (56%) 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 (15%) of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Sterling is to cost between 1.44 and 1.46 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for Sep 07 is 1.4637.