- 51% of all pending orders are still to sell the Pound
- 52% of all open positions are long
- Strong resistance is around 1.30
- Significant support rests circa 1.2870
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Upcoming Events: US Jolts Job Openings, UK Halifax HPI, US Crude Oil Inventories, US Consumer Credit
British services activity fell more than expected last month amid the upcoming 2017 General Election, official figures revealed on Monday. Markit reported that its Purchasing Managers' Index for the UK services sector dropped to 53.8 points in May, following the preceding month's 55.8 and falling behind expectations for 55.1. The weaker-than-expected figure smashed analysts' hopes for the Q2 rebound, as services activity accounts for about 70% of the British economy. Moreover, Monday's PMI data offset the better-than-expected PMI for both construction and manufacturing sector released last week.
Nevertheless, Markit reported that prices charged by services providers increased at the slowest pace since November, suggesting that inflation pressures began to wane. New orders grew at the slowest pace since February last month. Some companies blamed election jitters for their sluggish performance. Apart from that, the Society of Motor Manufacturers and Traders reported on Monday that demand for cars dropped 8.5% in May amid the upcoming June 8 Election.
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Uneventful Tuesday
There are no significant events relevant to both the UK and the US today, thus, attention turns to Wednesday's fundamentals. The UK Halifax HPI is due on Wednesday. It is the UK's longest running monthly house price series, which presents house prices and property price movements on a like-for-like basis. The housing prices are considered as a key indicator for inflationary pressures. From the US side the Consumer Credit will be released. It is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means.
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GBP/USD holds steady above 1.29
Not only did the rally on Monday cause the two-week down-trend to be pierced, but also help the Cable stabilise above the monthly pivot point. Nevertheless, the GBP/USD pair could still fall under the 1.29 mark in order to retest the up-trend, where the bullish momentum is expected to be reacquired. As a result, a bearish correction today would not be a surprise, but losses are unlikely to exceed yesterday's gains. Overall, technical indicators support the possibility of the bullish trend lasting through the week, at least from the technical perspective. Other factors, such as the elections in the UK on Thursday are also likely to have a serious impact on the Cable's exchange rate, with risks skewed to the downside, as it would confirm the rising wedge's end.
Hourly chart
The situation on the daily chart is quite similar to the hourly one, with no immediate signs of the bearish momentum prevailing. The up-trend keeps holding for now and is likely to keep the Cable afloat for at least two more days. The main concern now is now the UK Parliamentary Election, which could either strengthen or weaken the Pound dramatically.Daily chart
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Traders remain neutral
Market sentiment is still neutral, as 52% of all open positions are long. At the same time, there are now 51% of all pending orders set to sell the Pound.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 57% of all open positions are short and the remaining 43% are long. Meanwhile, sentiment at Saxo Bank is also bearish, with 60% of traders now being short and the other 40% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
© Dukascopy Bank SATraders believe the Cable is to rise above the 1.30 major level by the end of the next three months, as 53% of survey participants share this belief. While the current price is around 1.29, the average forecast for September 06 is 1.296. The 1.34-1.36 range is now the most popular price interval, having 23% of the votes, while on the second place is the 1.20-1.22 interval, with 16% of the voters choosing it.