GBP/USD to retreat from 1.3320

Source: Dukascopy Bank SA
  • Percentage of sell orders grew from 63 to 64%
  • Share of shorts reached 62%
  • Bears are likely to take over for now
  • Losses are expected to be limited by a strong support at 1.3237/25
  • 52% of traders reckon GBP/USD will be at 1.30 or lower in three months
  • Upcoming events: US ISM Non-Manufacturing PMI

According to the latest data released by Markit Economics, Britain's services sector rebounded notably in August, showing a strong recovery from the post-Brexit plunge recorded during the previous month. Markit's Purchasing Managers Index for the services sector added 5.5 points or rising from a four-year low of 47.4 in July to 52.9 in August, easily beating expectations for a 50 reading. Moreover, the increase of 5.5 points on a monthly period was the largest jump recorded over the 20-year history of the survey and followed a record drop of 4.9 points in July. It is worth to point out that PMI report followed news on Thursday of a bigger-than-expected rebound, to a 10-month high, of the Markit manufacturing-sector PMI for the UK and like the Thursday report, it boosted the pound. The Sterling soared to a seven-week high against the dollar after data showed the UK services sector rebounded sharply in August, following a slump during the previous months. The UK currency increased 0.35% against the dollar to 1.3340 mark.

Nevertheless, overall economic growth is expected to slow sharply, keeping alive the possibility of another Bank of England rate cut before the end of the year.

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UK Services PMI fails to restore pair's momentum; now it is US PMI's turn



Despite the UK Services PMI reinforcing the positive outlook on the British economy following improving Manufacturing and Construction PMIs, the Pound stayed virtually unchanged. The situation with an acute lack of volatility could be potentially changed today, as it may be cured by the end of US holidays and by the upcoming US ISM Non-Manufacturing PMI, which is expected to come in at 55.4 after 55.4 a month ago. A negative surprise should revive bullish momentum that was born in mid-August.



GBP/USD to retreat from 1.3320

The currency pair is lacking bullish momentum near resistance represented by the 23.60% retracement of the Jun 23—Jul 5 sell-off despite fundamentally strong Pound. Nevertheless, the price managed to fetch our target 1.3385/70 (monthly R1 and August maximum) yesterday. There is now a good possibility the bears will take over in the near term, but the losses are expected to be limited by a strong support at 1.3237/25, where the recently broken trendline is reinforced by the 55-day SMA and weekly pivot point.

Daily chart

© Dukascopy Bank SA

The hourly chart shows how quickly the pair backed off after a test of the August high at 1.3373. We are thus convinced that during the next few days the Sterling is going to weaken, but the near-term dips are to be contained by the nearby supports.

Hourly chart

© Dukascopy Bank SA



SWFX bears' advantage grows

Traders keep selling the British Pound, and the share of shorts has already reached 62%, up from 60% recorded 24 hours ago. At the same time, the percentage of sell orders is growing as well. It increased from 63 to 64%.

Bulls are retreating at Saxo Bank as well, where the portion of long positions has decreased from 45 to 42% since the previous report. On the other hand, OANDA traders fail to reach a consensus on the Cable. Just like yesterday, 52% of open positions are long and 48% are short.


Spreads (avg, pip) / Trading volume / Volatility

Majority sees the GBP/USD below 1.30 in three months

© Dukascopy Bank SA

Slightly more than half of traders (52%) believe the British currency is to cost 1.30 or less dollars after a three-month period. The most popular price intervals, however, were the 1.26-1.28, 1.34-1.36 and the 1.36-1.38 ones, all three selected by 13% of the voters. The second most popular choice implies that the Sterling is to cost either between 1.28 and 1.30 dollars or between 1.38 and 1.40 dollars in three months, both chosen by 11% of the surveyed. At the same time, the mean forecast for Dec 02 is 1.3064.

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