- The portion of orders to sell the British Pound increased from 53 to 73%
- 55% of all open positions are long
- The nearest resistance is located around 1.3170
- Support is at 1.3011
- 65% of traders reckon GBP/USD will be at 1.36 or lower in three months
- Upcoming events: US Markit Services PMI, US CB Consumer Confidence, US New Home Sales
More bad news for a post-Brexit Britain came as the July's flash manufacturing PMI figure fell dramatically against the June figure and missed expectations. This was one of the first PMI readings to have responses taken after the UK voted to leave the European Union on June 23. Markit's Purchasing Managers' Index in manufacturing fell to 49.1 points during the seventh month of the year, down from the 52.1 in June, when it had rebounded from its second-lowest level in the past 15 months and booked a fresh five-month top. Market consensus had been for a 50-point print in July.
Meanwhile, a separate report showed that activity in the country's services arena faltered to 47.4 during the reported month, steeply lower than 52.3 seen previously. That was the 88-month low or the lowest level since the economic crisis of 2009. Analysts had penciled in a deceleration to 49.2 points in July. The 50-point level marks the line between contraction and growth and the index has been volatile since the beginning of the year. The UK economy has been under pressure as Brexit-related uncertainty darkened the outlook for businesses. In the referendum last month, Britain voted to divorce the European Union, sending shock waves across global financial markets.
Uneventful Monday
Monday is a dull day in terms of fundamental data releases, but on Tuesday attention could be paid to the US Markit Services PMI and the New Home Sales figures. The Services PMI capture business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in US. As for the New Home Sales, they are an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes so as a result the demand for goods, services and the employees is stimulated.
GBP/USD remains on the back foot
In the wake of poor UK Services PMI figures the Sterling erased all weekly gains, having fallen back to the 1.31 major level against the US Dollar. Despite being supported by this psychological level, the GBP/USD currency pair is expected to fall lower or at least close near the 1.31 mark again. A strong resistance cluster, represented by the weekly PP and the 20-day SMA, is weighing on the Cable today, while technical indicators are giving bearish signals in the daily timeframe. Meanwhile, the nearest support is located only at 1.3011, namely the weekly S1, unless the 1.31 manages to limit the possible losses.
Daily chart
The GBP/USD currency pair appears to have entered a downsliding channel, confirming the upper trend-line on Friday with a solid decline. Any upside potential is expected to be limited by the 200-hour SMA, which in turn is bolstering the channel's resistance line, whereas the location of the lower boundary opens the door for a decline towards 1.3050.
Hourly chart
Bulls remain in control
There are 55% of all open positions being long today, compared to 58% on Friday. At the same time, the portion of orders to sell the British Pound increased from 53 to 73%.
Compared to Friday, there are slightly more bulls at OANDA - they take up 57% of the positions open with the Canada-based broker (previously 53%). Sentiment at Saxo Bank remains somewhat neutral, as here the number of bears exceeds the number of bulls by only 4 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.36 in three months
More than half of traders (65%) believe the British currency is to cost 1.36 or less dollars after a three-month period. The most popular price intervals was selected by only 19% of the voters, namely the 1.28-1.30 one, while the second most popular choice implies that the Sterling is to cost between 1.24 and 1.26 dollars in three months, chosen by 18% of the surveyed. At the same time, the mean forecast for Oct 25 is 1.3308.