- 55% of pending orders in 100-pip range are to sell the pair
- 57% of traders are bullish on the Pound
- Gains could be capped near the 1.3140 mark
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Upcoming Events: US Labour Market Conditions Index m/m, FOMC Member Kashkari speaks, US Consumer Credit m/m, UK BRC Retail Sales Monitor y/y
During the last month, Britain's officials fuelled expectations that the Central Bank was likely to raise interest rates, though Thursday's reports showed it unchanged, resulting in the immediate fall in the GBP/USD currency pair. The Sterling fell against the US Dollar by 0.44% to be seen trading at 1.3180 as the Bank of England kept its dovish stance. The Central Bank's key rate remained at a record-low level of 0.25% amid anticipations for subdued growth of wages and diminishing forecasts for economic expansion, as companies showed more cautious approach to investments. A weaker Pound, though, could push inflation higher to eventually reach 3% in October. Still, experts saw possibility of a rate hike only along with first signs of sustainable expansion.
The British Pound depreciated against the US Dollar, as the data revealed that the UK construction industry grew at the slowest pace in 11 months in July. After the report, the GDP/USD exchange rate fell by 0.06% to be seen trading at 1.3234. Markit revealed that its PMI for Britain's construction sector dropped to 51.5 in July, below forecasts for a modest decline to 54.5 points. The report showed a decrease in commercial development and weaker house building, which reflected a slowdown in the property market. Moreover, post-election uncertainties and unclarity surrounding the country's economic outlook resulted in subdued demand for construction, while firms revealed less confidence about the future of the sector.
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Minor data releases
The economic calendar in this trading session includes some minor data releases and fundamental events. The United States is to publish monthly Labour Market Conditions Index and Consumer Credit at 1400GTM and 1900GMT, while the British Retail Consortium will release Retail Sales Monitor for the month of July at 2301GMT. In addition, the President of the Federal Reserve Bank of Minneapolis Neel Kashkari is to speak at 1725GMT.
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GBP/USD calm after fundamentals
The GBP/USD currency pair started Friday's session rather calmly, being supported by the 200-hour SMA near 1.32. This lack of movement, however, changed at 1230GMT when solid fundamentals from the US altered market sentiment in favour of Dollar bulls. Thus, the Pound ended the previous trading week slightly above the 1.3020 mark and remained in the same range this morning, as well. The aforementioned plunge set the pair in the strongly bearish territory; thus, it is expected that the Pound tries to recover some losses and approach the monthly PP or a resistance cluster formed by the 55– and 200-hour SMAs circa 1.3150. Meanwhile, the lack of market shakers today may likewise keep the pair relatively still, thus resulting in the Pound fluctuating around the 20-hour SMA.
Hourly chart
Following two subsequent days of strong depreciation, the Pound demonstrated the equal strength of both bulls and bears on Monday morning. The rate has reached the lower boundary of a minor ascending wedge that could push the Pound for an appreciation against the US Dollar. Nevertheless, given this lack of momentum, market sentiment may change in any direction. The rate is currently located at the 20-day SMA, while the next important resistance is set by the monthly PP at 1.3085.Daily chart
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Bullish sentiment remains in force
The bullish market sentiment in this session has not changed from Friday, remaining at the 57% mark. Meanwhile, 52% of pending orders are to sell the Pound (-4% from Friday).
In the meantime, traders at Saxo Bank remain bearish on the pair, with 65% of traders holding short positions (-1%).The same bearish sentiment is shared by OANDA where 58% of open positions are likewise short (+2%).
Spreads (avg, pip) / Trading volume / Volatility