- 67% of all pending orders are to acquire the Pound
- 52% of traders hold short positions
- Immediate resistance is around 1.3025
- The closest support is at 1. 2897
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Upcoming events: UK Construction PMI, US ADP Non-Farm Employment Change, US Services PMI, FOMC Statement, US Federal Funds Rate, US Crude Oil Inventories
British manufacturing activity hit its best since 2014 last month, supported by a solid global economic recovery and the weak Pound. Markit/CIPS reported on Tuesday that its Purchasing Managers' Index for the British manufacturing sector came in at 57.3 in April, following the preceding month's 54.2 and surpassing analysts' expectations for a decline to 54.0. Tuesday's data is set to provide an additional support to the current British Prime Minister Theresa May ahead of the June 8 National Election. According to the data, British manufacturers enjoyed the recent positive performance of the global economy and the cheaper Sterling, which boosted export growth. However, back in March, the Bank of England Deputy Governor Ben Broadbent said that a rebound in the performance of the UK manufacturing sector might vanish soon and the future performance of the sector would solely depend on the outcome of Brexit negotiations.
Moreover, some analysts claim that manufacturers will stop benefiting from the weak currency soon. Nevertheless, Tuesday's data is set to please the Central bank, which is due to meet next week. After the release, the British Pound hit its seven-month high against the US Dollar but failed to sustain its gains.
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US ADP Non-Farm Employment Change and FOMC Statement
Today from the UK side attention could be paid to the UK Construction PMI, as it shows business conditions in the UK construction sector. It is worth noting that the construction sector does not influence, either positively, or negatively, the GDP as much as the Manufacturing sector does. From the US Side, an important fundamental economic event will be the ADP Employment Change data Release. It is a measure of the change in the number of employed people in the US. A rise in this indicator has positive implications for consumer spending, stimulating economic growth. The Federal Funds Rate decision is unlikely to have any impact, as no rate increase is expected until June, but the tone of the FOMC Statement could have either positive or negative effect on the US Dollar.
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GBP/USD expected to return under 1.29
The British Pound surprised with its performance on Tuesday, being that it outperformed the US Dollar and reclaimed the 1.29 level. Technical indicators today keep giving positive signals, suggesting the Sterling is to edge higher against the Buck for another day. Such an outcome is possible, but in this case gains are likely to be capped around 1.3020, with the broadening rising wedge's upper border and the weekly R1 representing resistance there. On the other hand, upbeat US fundamentals could boost the Greenback, which would cause the Cable to fall even under the second support, namely the weekly S1.
Daily chart
The GBP/USD currency pair remains underpinned by the four-week up-trend and the 200-hour SMA on the hourly chart, suggesting that more bullish momentum could follow. This also confirms the outlook on the daily chart, but downside risks are also present, as fundamental drivers remain in play.Hourly chart
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Traders are equally divided
There are 52% of traders holding short positions today (previously 51%), whereas 67% of all pending orders are to acquire the Pound.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 61% of all open positions are short and the remaining 39% are long. Meanwhile, sentiment at Saxo Bank worsened again over the day, with 57% of traders now being short and the other 43% being long 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 believe the Cable is to rise above the 1.28 major level, as 63% of survey participants believe so. While the current price is around 1.29, the average forecast for August 03 is 1.2890. The 1.30-1.32 range is now the most popular price interval, having 15% of the votes each, while on the second place is the 1.28-1.30, with 14% of poll participants choosing it. Furthermore, the 1.32-1.34 and the 1.34-1.36 intervals were selected by 12% of the voters.