- 66% of all pending orders are to buy the Pound
- 51% of traders hold short positions
- Immediate resistance is around 1.2897
- The closest support is at 1.2829
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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
The Purchasing Managers' Index for the US manufacturing sector grew less than analysts estimated. According to the Institute for Supply Management, the PMI lost 2.4% compared to the previous month and tumbled to 54.8%, while experts anticipated only a slight decrease of 0.6%. Although in April the PMI rose at the slowest pace this year so far, it still remained above the 12-month average of53.6%. The ISM report showed that the New Orders, Employment and Supplier Deliveries Indices dropped 7.0%, 6.9% and 0.8%, accordingly. Meanwhile, both Inventories and Prices Indices posted a 2% advance, which indicated that manufacturing companies stockpiled more raw materials than in the previous month and their costs increased. Nevertheless, all 18 manufacturing industries, excluding the apparel, leather and allied products industry, reported growth in April. In addition, all 15 commodities included in the report rose in price. Rising prices confirmed the view that inflation growth remained solid.
Overall, all Indices remained above the 50%threshold and, thus, confirmed the general, long-term upward trend. Even though GDP figures released on Friday last week missed forecasts, analysts suggest that the US economy will likely regain momentum in the upcoming quarters.
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No significant events until Wednesday
With the UK Manufacturing PMI already released, there are no other significant data releases scheduled for today. However, tomorrow 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 to keep sliding down
As was anticipated, the GBP/USD currency pair made a U-turn on Monday, falling back under the 1.29 mark. However, the second support, namely the weekly S1 at 1.2829, was not reached yesterday, but the Cable is likely to put that demand level to the test today. Technical indicators, on the other hand, are unable to confirm this outlook, but they are no longer giving distinctly bullish signals in the daily timeframe either. Ultimately, the Sterling should weaken through the week and find support around 1.27, but a number of fundamentals, especially the US NFP, could provide the given pair with a solid boost, in which case the 1.30 handle could easily be overcome.
Daily chart
According to the hourly chart, the Cable should continue edging higher, as it approached the four-week up-trend earlier today. The trend-line is bolstered by the 200-hour SMA, which should contribute to a possible rebound. However, this contradicts with the daily outlook, thus, we should not rule out the possibility of downside breach.Hourly chart
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Traders are equally divided
Traders retain a neutral outlook towards the Pound, as 51% of all open positions are short. The share of buy orders surged from 40 to 66%.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 62% of all open positions are short and the remaining 38% are long. Meanwhile, sentiment at Saxo Bank worsened again over the day, with 56% of traders now being short and the other 44% 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 1.26 major level, as 64% of survey participants believe so. While the current price is around 1.29, the average forecast for August 02 is 1.2816. The 1.28-1.30 and the 1.30-1.32 ranges are now the most popular price intervals, having 14% of the votes each, while on the second place are the 1.32-1.34 and the 1.34-1.36 ones, with 12% of poll participants choosing them both. Furthermore, the 1.20-1.22 interval was selected by 11% of the voters.