- The share of sell orders slid from 55 to 51%
- 58% of traders are now long the Pound
- The nearest resistance is located around 1.4720
- The 20-day SMA, the weekly and the monthly PPs form support circa 1.4540
- 56% of traders reckon GBP/USD will be at 1.46 or higher in three months
- Upcoming events: UK Industrial and Manufacturing Productions, UK NIESR GDP Estimate, US JOLTS Job Openings, US Crude Oil Inventories
The British currency managed to post rather significant gains on Tuesday, having declined notable only against the Aussie. The RBA's decision to leave its cash rate unchanged at 1.75% provided the Aussie with sufficient strength to outperform the Sterling, with the GBP/AUD edging 0.53% lower. The only other decline was seen against the Kiwi, which accounted for 0.10%, while against the third commodity currency, namely the Loonie, the Pound barely managed to add any value, having surged 0.06%. Relatively significant gains were registered against the Yen (0.54%), the Euro (0.67%) and even versus the US Dollar (0.71%).
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.
UK Manufacturing and Industrial Production, and the NIESR GDP Estimate
A number of fundamentals are scheduled for today, which are likely to have an impact on the GBP/USD pair. First of all, the UK Manufacturing Production, it is a measure of the manufacturing output. Manufacturing Production is significant as a short-term indicator of the strength of the UK manufacturing activity, that dominates a large part of total GDP. Second, the Industrial Production, it measures outputs of the UK factories and mines. Changes in Industrial Production are widely followed as a major indicator of strength in the manufacturing sector. Third, the NIESR GDP Estimate, which is an estimate of growth over the last three months up to the report, which comes out a month before the official announcement. The report is highly reliable and would influence the UK monetary policy. Finally, one economic data release from the US side – the JOLTS Job Openings. It is released by the Bureau of Labor Statistics, it is the number of job openings during the reported month, excluding the farming industry. Even though it is released late, it can still have an impact on the market, because job openings are a leading indicator of overall employment.
GBP/USD muted during early trade
With another substantial jump, the Cable was able to retake the 1.45 major level yesterday and even climb over the tough resistance around 1.4535. The same cluster now acts as the nearest support, but a lot weaker than the ascending channel's support line, which is located at 1.4421, also remaining bolstered by the 55-day SMA. Even though the medium-term bias is bullish, the Sterling could still weaken and put the trend-line to another test. Demand, represented by the immediate support cluster might also be sufficient to cause the GBP/USD currency pair to prolong its recovery, allowing it to climb at least 50 pips, until the 1.46 level is reached.
Daily chart
Eventually the 200-hour SMA gave in yesterday, allowing the GBP/USD to once again touch the 1.46 mark. Even though the Cable lacks the strength to maintain trade at such highs, the current bullish trend is expected to push the Pound even beyond that level if not in the upcoming days, then weeks.
Hourly chart
Bulls and bears remain in balance
Bulls grew stronger over the day, as 58% of traders are now long the Pound (previously 54%). The share of sell orders slid from 55 to 51%.
Compared to Tuesday, there are also slightly less bulls at OANDA - they take up 58% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is even closer to being neutral, but here the number of bulls exceeds the number of bears by only two 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 either between 1.44 and 1.46, or between 1.48 and 1.50 or even between 1.52 and 1.54 dollars in three months, all three chosen by 13% of the surveyed. At the same time, the mean forecast for Sep 08 is 1.461.
Dukascopy traders are fully sure about the development of the pair, as the average forecast for June 10 is located slightly below the closing level of last Friday, namely at 1.45. Traders' sentiment, in turn, fully worsened, as now 66.7% of votes is short at the moment.
Retaining a positive outlook towards the Cable this week, nuonrg suggests that "the pair closed below the 1.453 mark, but still on a bullish note." He also mentioned that "we might get a straight push forward. But there are some weakening sings below this level."
Traders are still wary of the ‘Brexit', being that AgentSmith is bearish on the Sterling/Dollar. "The Brexit risk continues to undermine GBP with choppy price action expected to continue until the referendum is held," he commented on his view.