- 57% of all pending orders are to buy the Pound
- 52% of all open positions are long
- Strong resistance is around 1.30
- Significant support rests circa 1.2870
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Upcoming Events: UK Halifax HPI, US Crude Oil Inventories, US Consumer Credit
British services activity fell more than expected last month amid the upcoming 2017 General Election, official figures revealed on Monday. Markit reported that its Purchasing Managers' Index for the UK services sector dropped to 53.8 points in May, following the preceding month's 55.8 and falling behind expectations for 55.1. The weaker-than-expected figure smashed analysts' hopes for the Q2 rebound, as services activity accounts for about 70% of the British economy. Moreover, Monday's PMI data offset the better-than-expected PMI for both construction and manufacturing sector released last week.
Nevertheless, Markit reported that prices charged by services providers increased at the slowest pace since November, suggesting that inflation pressures began to wane. New orders grew at the slowest pace since February last month. Some companies blamed election jitters for their sluggish performance. Apart from that, the Society of Motor Manufacturers and Traders reported on Monday that demand for cars dropped 8.5% in May amid the upcoming June 8 Election.
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Uneventful Tuesday
Wednesday is not rich in terms of fundamental data releases, but some second-class events are still due. First of all, the first UK Halifax HPI, which is the UK's longest running monthly house price series, which presents house prices and property price movements on a like-for-like basis. The housing prices are considered as a key indicator for inflationary pressures. From the US side the Consumer Credit will be released. It is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means.
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GBP/USD to trade flat for another day
The Cable experienced minor volatility on Tuesday, with the exchange rate mostly gravitating towards the monthly pivot point. Flat trade could indicate that the Pound's bullish momentum is nearing its end, even though technical studies suggest the opposite. In either case, the Sterling is likely to consolidate for another day, with trade anchored around the 1.29 major level and the three-month up-trend remaining a strong support, which is to limit any losses should those occur today. Gains, however, are unlikely to exceed the 1.2940 handle, as the British currency struggled to climb over this area through all of the previous week. Meanwhile, traders retain a neutral outlook towards the GBP/USD pair, as 52% of all open positions are long.
Hourly chart
The daily chart mostly supports the situation on the hourly one, with the Cable's bullish trend currently intact. However, downside risks are still present, with the tomorrow's UK Parliamentary Election having a solid chance of driving the pair lower, whereas a positive surprise would imply the continuation of the rising wedge pattern.Daily chart
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Traders remain neutral
Market sentiment is still neutral, as 52% of all open positions are long. At the same time, there are now 57% of all pending orders set to acquire the British Pound.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 59% of all open positions are short and the remaining 41% are long. Meanwhile, sentiment at Saxo Bank is also bearish, with 62% of traders now being short and the other 38% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
© Dukascopy Bank SATraders believe the Cable is to rise above the 1.30 major level by the end of the next three months, as 50% of survey participants share this belief. While the current price is around 1.29, the average forecast for September 07 is 1.2919. The 1.34-1.36 range is now the most popular price interval, having 24% of the votes, while on the second place is the 1.20-1.22 interval, with 17% of the voters choosing it.