- The number of orders to buy the Sterling slid from 68 to 57%
- 60% of traders hold long positions
- The nearest resistance is located at 1.3819
- Support is at 1.3230
- 59% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: UK Manufacturing PMI, US ISM and Markit Manufacturing PMIs, US Construction Spending
UK economy slowed in the first quarter, dragged down by weaker business investment and a growing trade deficit. Meanwhile, the current account deficit narrowed less than expected at the start of this year. According to the Office for National Statistics, the third estimate of the UK's first quarter GDP showed that the economy expanded 0.4% on a quarter base, unrevised from the previous forecast. The following data is in line with economists' forecasts. Moreover the annual GDP growth was also unrevised to 2%, pushing the UK economy to reach 7% above its pre-crisis peak in the three months from January to March.
However, business investment declined in the first quarter. Gross fixed capital investment plunged 0.1% during the first quarter, revised down from an earlier estimate of 0.5%. Meanwhile, several economists think that the PMI data for May suggests that the UK economic growth will decelerate further in Q2 to 0.2%. Financial markets have been in panic mode during the last few days as political infighting in Westminster, and uncertainty about Britain's future in Europe, have generated significant downward pressure on sentiment.
UK and US Manufacturing PMIs to focus on
Among important fundamental events the UK and US Manufacturing PMI's are due. In UK the Manufacturing PMI is released by both the Chartered Institute of Purchasing & Supply and the Markit Economics, which capture business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic conditions in the UK. The same goes for the US as well, thus, the Cable's movement is mostly to be dependent on the data results.
GBP/USD in tight range between 1.32 and 1.35
The British Pound failed to advance for the third day yesterday, but with the exchange rate stabilising above the 1.33 major level, after having put the immediate support cluster to the test. The Sterling is expected to remain between the 1.32 and 1.35 major levels, which are the borders of the Cable's current consolidation trend. Technical indicators are also in favour of the GBP/USD pair remaining relatively unchanged, as they retain mixed signals. The 1.3230 level, namely the post-referendum low, is still likely to be the lowest point where price can stabilise, while the 1.3440 mark is the potential upper border today.
Daily chart
Ever since the post-referendum drop the Cable has been slowly but steadily climbing higher. Consequently, the trend-line on the hourly chart is likely to be the demand area, pushing the GBP/USD exchange rate higher, with the 200-hour SMA being the nearest resistance.
Hourly chart
Bulls remain in control
There are 60% of traders holding long positions today (previously 54%) while the number of orders to buy the Sterling slid from 68 to 57%.
Compared to Monday, there are also slightly more bears at OANDA - they take up 57% of the positions open with the Canada-based broker. Sentiment at Saxo Bank turned bullish, as here the number of bulls exceeds the number of bears by 14 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
More than half of traders (59%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The most popular price intervals was selected by slightly less than a fifth (14%) of the voters, namely the 1.36-1.38 one, while the second most popular choice implies that the Sterling is to cost between 1.40 and 1.42 dollars in three months, chosen by 11% of the surveyed. At the same time, the mean forecast for Oct 01 is 1.4203.