- 52% of all pending orders are to purchase the British currency
- 53% of all open positions are long
- Immediate resistance is at 1.2560
- The closest support is at 1.2516
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Upcoming Events: US Manufacturing PMI, US Construction Spending
Data released on Friday showed that the UK's current account deficit hit a five-year record low, which surprised many experts. In the Q4 of 2016, the current account advanced from -25.7 billion pounds to -12.1 billion pounds. The country's trade balance with the rest of the world improved dramatically. Thus, in the Q4 of 2016, total trade deficit fell from 14.8 billion pounds to 4.8 billion pounds, due to the notable increase in goods export. In addition, there was also a less significant narrowing in the deficit on primary and secondary income accounts. According to the data, the deficits on secondary income and primary income fell from 4.3 billion pounds to 1.0 billion pounds amid a surge in direct investment.
Overall, the UK's current account amounted for 2.4% of GDP, which by itself grew at the pace of 0.7%. This data marked the 16th consecutive quarterly increase and secured country's steady growth. A GDP rise in the last quarter reflects strong consumer spending and satisfactory results in the consumer-related industries. However, experts also recorded a 0.9% decline in business investment that is associated with the Brexit deal uncertainties. Finally, on a year-to-year basis, the UK's GDP lost 0.4%, which was also attributable to the country's decision to leave the EU.
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US Manufacturing PMI and Construction Spending
Among important economic data releases today attention should be paid to the US Manufacturing PMI. It is released by both, the Institute for Supply Management and Markit Economics. It captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the US. Another relatively important event will be the US Construction Spending data release. It is an indicator that measures the total amount of spending in the US on all types of construction. The residential construction component is useful for predicting future national new home sales and mortgage origination volume.
Read More: Fundamental Analysis
GBP/USD reconfirms bearish trend-line
The Sterling received a boost from upbeat fundamental data on Friday, which allowed it to outperform the American Dollar and retest the six-month down-trend. Technically, the GBP/USD currency pair should now bounce back from the trend-line, undergoing a bearish correction. The weekly pivot point represents immediate support at 1.2516, but is unlikely to limit the losses should those occur. At the same time, the second demand area, namely the cluster circa 1.2420, is also expected to remain out of reach today. The base case scenario is a close around 1.2490/80 zone.
Daily chart
© Dukascopy Bank SA
Once again the Cable formed an ascending channel pattern, which received a strong confirmation today, having begun declining. As a result, the GBP/USD pair is expected to rebound from the 1.2480 area and prolong the pattern. However, downside risks also persist, as a failure to rebound could indicate that the channel's support line could be breached.Hourly chart
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Traders mostly bullish
Market sentiment is somewhat neutral today, as 53% of all open positions are long and the remaining 47% are short. Concerning the pending orders, 52% of them are to purchase the British currency.
A slightly less optimistic situation is observed elsewhere. For example, 52% of positions open at OANDA are currently long. This is more than the share of shorts (48%), but not sufficient to call the sentiment bullish, instead it is neutral. Meanwhile, sentiment at Saxo Bank is also quite close to equilibrium, with 54% of traders now being long and the other 46% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
© Dukascopy Bank SABy the end of the next three months traders expect the Cable to rise above the 1.22 major level, as 51% of survey participants believe so. While the current price is around 1.25, the average forecast for July 03 is 1.2296. The 1.30-1.32 range is now the most popular price interval, having 17% of the votes, while on the second place is the 1.14-1.16 price range, with 13% of poll participants choosing it. Furthermore, the 1.16-1.18, the 1.18-1.20, the 1.24-1.26 and the 1.26-1.28 intervals were each selected by 10% of voters.