- 60% of all pending orders are to sell the Pound
- 57% of all open positions are long
- Possible upside limit rests at 1.2940
- Significant support rests circa 1.2860
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Upcoming Events: US Labour Market Conditions Index m/m, US Consumer Credit m/m, UK BRC Retail Sales Monitor y/y
Output in the UK manufacturing industry dropped unexpectedly over the month in May, suggesting that the country's economic growth continued to weaken. The Office for National Statistics reported on Friday that manufacturing production fell 0.2% in the observed month, compared with April's 0.2% increase.
Meanwhile, analysts anticipated British manufacturing production to expand 0.5%. The report showed two main contributors to the decline, with car production registering a 4.4% fall, the steepest since February 2016, while energy sector fell 0.8% amid lower gas supply. On a yearly basis, total production dropped 0.2% with downward trends in two of the four main sectors. Experts suggested that a high degree of uncertainty about the future of the UK and the European Union's trade relationship weighed on the country's manufacturing industry. Moreover, weaker-than-expected figures added to expectations for a more modest Britain's economic expansion in the Q2, following the first quarter's 0.2% increase, the lowest among the G7 countries.
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Minor Data Releases
No important data releases that could shake the market tremendously are expected in this session. The United States are to release monthly Labour Market Conditions Index and June consumer credit data at 1400 and 1900GMT, accordingly. Likewise, the UK is to publish yearly BRC Retail Sales Monitor at 2301GMT.
Read More: Fundamental Analysis
GBP/USD recovers losses on Monday
Despite technical indicators being bullish on Friday morning, GBP/USD plunged 98 pips within couple of hours mid-session. The most significant downfall resulted from weak UK data released at 0830GMT. This move pushed technical indicators in the strongly bullish and oversold territory. The rate, however, was halted at the 55-day SMA near the 1.2875 mark prior to making a U-turn. The Pound has started to recover some losses and is expected to continue doing so in this trading session, as the pair has formed a minor falling wedge that should lead it to the upper boundary of this pattern circa 1.2930. The Sterling may likewise trade sideways, given the lack of strong market movers scheduled for today. By and large, a possible trading range is likely to be 1.2883/1.2930.
Hourly chart
GBP/USD was driven by slight downside risks in the morning session that resulted in the Pound losing ground against the US Dollar. The nearest support is formed by the monthly PP and the 55-day SMA circa 1.2880. In case bears prevail, the given level should be breached. Resistance, on the other hand, is very distant, being located at the 1.3212 mark (38.2% Fibo).Daily chart
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Bearish sentiment prevails
Market sentiment is bullish on Friday, as 57% of open positions are long (57% on Friday). Meanwhile, 60% of set up orders are to sell the Pound.
On the contrary, traders at Saxo Bank remain bearish, with 64% of traders holding short positions (66% previously). Moreover, 61% of OANDA clients hold short positions.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound falling
© Dukascopy Bank SAThe majority of traders believe that the Cable is to fall below the 1.28 mark three months from now, as 53% of survey participants share this belief. The current spot price is around 1.2890, while the average forecast for October 10 is 1.2739 (1.2750 on Friday). The 1.24-1.26 range remains the most popular price interval, having 26% of the votes (-3%).