- 57% of all pending orders are to sell the Pound
- 59% of all open positions are long
- Possible upside limit rests at 1.2926
- Significant support rests circa 1.2860
-
Upcoming Events: MPC Member Haldane Speaks, MPC Member Broadbent Speaks, US JOLTS Job Openings, FOMC Member Brainard Speaks
Output in the UK manufacturing industry dropped unexpectedly over the month in May, suggesting that the country's economic growth continued to weaken. The Office for National Statistics reported on Friday that manufacturing production fell 0.2% in the observed month, compared with April's 0.2% increase.
Meanwhile, analysts anticipated British manufacturing production to expand 0.5%. The report showed two main contributors to the decline, with car production registering a 4.4% fall, the steepest since February 2016, while energy sector fell 0.8% amid lower gas supply. On a yearly basis, total production dropped 0.2% with downward trends in two of the four main sectors. Experts suggested that a high degree of uncertainty about the future of the UK and the European Union's trade relationship weighed on the country's manufacturing industry. Moreover, weaker-than-expected figures added to expectations for a more modest Britain's economic expansion in the Q2, following the first quarter's 0.2% increase, the lowest among the G7 countries.
Watch More: Dukascopy TV
Minor Data Releases
Similarly to Monday, there are no significant data releases in this session. In terms of fundamental events from the UK, two BOE officials are to speak today - BOE Chief Economist Andy Haldane is to participate in a panel discussion at 1000 GMT, while BOE Deputy Governor Ben Broadbent is to speak at the Scottish Council for Development and Industry at 1100 GMT. In addition, the Federal Reserve Governor Lael Brainard will discuss the topic of normalizing central banks' balance sheets at 1630 GMT. Finally, the US is to publish monthly data on JOLTS Job Openings at 1400 GMT.
Read More: Fundamental Analysis
GBP/USD tests monthly PP
Bears prevailed on Monday's session, pushing the Sterling below the monthly PP at 1.2883. Subsequently, the pair fluctuated around the 20-hour SMA, but nevertheless failed to surpass the aforementioned PP. Apart from some bigger leaps in both directions, the pair demonstrated low volatility that resulted from a lack of market shakers. The same situation is likely to occur in this session, forming a consolidation phase. In this case, it should be apparent that the channel down will not hold any longer and some alteration may be due. Given the bearish sentiment, the pair may trade lower in the upcoming hours; however, upside risks should guide the Pound north in the evening. Gains may be capped at 1.2926, while the bottom limit should be circa 1.2828.
Hourly chart
As apparent from the daily chart, the Pound has pushed off a joint support of the 55-day SMA and the weekly PP circa 1.2880. However, no resistance levels are located in near distance; thus, intraday technical signals and trend-lines should be more valuable sources in determining the pair's possible direction. In case the current sentiment prevails, the Sterling is likely to close in the green area.Daily chart
Read More: Technical Analysis/
Bearish sentiment prevails
Market sentiment remains bullish on Friday, as 59% of open positions are long (57% on Monday). Meanwhile, 57% of set up orders are to sell the Pound.
On the contrary, traders at Saxo Bank are bearish on the pair, with 62% of traders holding short positions (60% previously). Moreover, 60% of OANDA clients hold short positions.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound falling
© Dukascopy Bank SAThe majority of traders believe that the Cable should fall below the 1.28 mark three months from now, as 59% (+3%) of survey participants share this belief. The current spot price is around 1.2900, while the average forecast for October 11 is 1.2795 (1.2739 on Monday). The 1.24-1.26 range remains the most popular price interval, having 29% of the votes (+3%).