- 52% of all pending orders are to sell the British currency
- 58% of traders are long the Pound
- Immediate resistance is around 1.23
- The closest support is at 1.2235
- Upcoming Events: US Markit and ISM Manufacturing PMIs, Fed Chair Yellen's Speech
UK construction activity rose slightly in February amid the strengthening civil engineering sector; however, surging costs and a drop in new orders pointed to a mixed outlook, a private survey revealed on Thursday. Markit reported its Purchasing Managers' Index for the country's construction sector climbed to 52.5 in December, following the previous month's 52.2 points and surpassing analysts' expectations for an unchanged reading. However, the housebuilding output rate rose at its slowest pace in six months, while companies in the commercial sector reported the first decline in business activity since October. Nevertheless, these losses were offset by gains in the civil engineering sector as well as improving employment. The survey also showed that the effects of the weaker British Pound put upward pressures on materials and goods prices. Therefore, analysts' expectations of a rebound in construction activity in 2017 started to fade.
Moreover, uncertainties surrounding Britain's economic outlook continued to put downward pressure on business confidence. Though, February's report showed that construction firms remained optimistic about expansion prospects, whereas only 13% of respondents said they expected to see a decline in business activity.
Fed Chair Yellen's Speech and Services PMI due later today
Friday is also a relatively quiet day, with UK Services PMI already released, attention turns to the US Services PMI. It is divided into two separate data release, one by Markit and the other one by the Institute for Supply Management. The Services PMI captures 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 the US. However, today's Fed Yellen's speech is still likely to have the most impact and the most important event to day attention to.
GBP/USD trades in murky waters
For the fifth consecutive time the British Pound weakened against the US Dollar on Thursday. The pair managed to retain its positions above the monthly S1, but another spark of GBP-selling is likely to cause the Cable to fall below this support level. Moreover, technical indicators are bolstering the possibility of the negative outcome today, as they are giving bearish signals both in the daily and the weekly timeframes. Any hints of a possible Fed rate hike in March given by Janet Yellen today are to ensure this scenario, but a disappointment could turn the tide for the Cable, causing it to partially recover from a full week of losses.
Daily chart
At firs the GBP/USD currency pair was able to find support at the lowest level since January 19, but more bearish momentum followed later today, causing the exchange rate to fall even lower. The next target will be the 1.1987, the current 2017 low.
Hourly chart
Traders mostly bullish
Today 58% of traders are long the Pound (previously 59%), whereas 52% of all pending orders are to sell the British currency.
A slightly more optimistic situation is observed elsewhere. For example, 65% of positions open at OANDA are currently long. This is more than the share of shorts (35%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 68% of traders now being long and the other 32% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
By the end of the next three months traders expect the Cable to fall under the 1.22 major level, as 52% of survey participants believe so. While the current price is around 1.24, the average forecast for June 03 is 1.2389. The 1.20-1.22 interval is now the most popular price interval, having 22% of the votes, while on the second place is the 1.28-1.30 price range, with 19% of poll participants choosing it. Furthermore, the 1.18-1.20 interval was each chosen by 15% of the voters.