- 55% of pending orders in the 100-pip range are to BUY the Sterling
- SWFX market sentiment is 64% bullish
- Upcoming fundamental events: UK Average Earnings Index 3m/y, Claimant Change and Unemployment Rate; US CPI and Core CPI
GBP/USD breached the 200-hour SMA early on Tuesday which might point to further downside potential.
The British Pound strengthened against the Greenback, following UK Construction PMI data release on Monday. The GBP/USD currency pair gained only three pips, or 0.02%, to continue going up afterwards.
The Markit released Construction Purchasing Managers' Index data that came out a little bit better-than-expected, however stayed unchanged from the previous period of 52.5.
"Higher prices for fuel, raw material shortages, higher labor costs combined with slow delivery times were further obstacles to growth as firms nervously assessed their workforce for much-needed talent and sub-contractors could name their price," said Tim Moore, Senior Economist at IHS Markit and author of the Markit/CIPS Construction PMI.
US CPI in focus
The first data release of importance on Tuesday is the British Average Earnings Index for April published at 0830GMT. The Claimant Count Change and Unemployment Change are likewise released at the same time. Meanwhile, the US Bureau of Labour Statistics is to publish the Consumer Price Index and its core reading at 1230GMT. Analysts expect a 0.2% and 0.1% increase month-on-month, respectively.
Some noise today could be caused by political developments in the Singapore Summit which has brought together the US President Donald Trump and the North Korean leader Kim Jong-un.
GBP/USD falls below 200-hour SMA
Bears dominated the GBP/USD exchange rate yesterday. After testing the monthly PP, disappointing data on the British Manufacturing Production pushed the Sterling 55 pips lower down to the 200-hour SMA and the bottom boundary of a three-week channel near 1.3360. The pair subsequently tried to regain some positions, but nevertheless failed to gain strength and fell below this support.It is likely that the pair continues to edge lower in this session, as well. The nearest support is the weekly S1 at 1.3313, while no other support is located until the weekly S2 at 1.3215.
Meanwhile, the Pound is currently testing the 55– and 100-period (4H) SMAs. In case this support holds strong, it should target the aforementioned monthly PP and move even higher up to 1.3460.
Hourly chart
The Sterling has plunged 7.28% against the US Dollar since mid-April. Despite lingering near the 200-day SMA for a couple of days, downside risks prevailed and pushed the rate as low as the 1.3245 late in May.
As apparent on the chart, the Pound has started to recover from its six-month low. This appreciation is expected to continue during the following two weeks. The nearest significant resistance is the monthly PP at 1.3430, while this upward surge should continue until the 200-day SMA, at least.
Daily Chart
The SWFX market sentiment is 64% bullish today. Likewise, 52% of pending orders are to buy the Pound (-3%).
The market sentiment of OANDA is strongly bullish, as 65% of its traders are holding long positions (-3%). Saxo Bank clients are likewise bullish with 59% long positions.
Spreads (avg, pip) / Trading volume / Volatility