- 59% of all pending orders are to buy the Pound
- 58% of all open positions are long
- The possible downside limit rests at 1.2903
- Significant support rests circa 1.2920
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Upcoming Events: US ISM Manufacturing PMI, US Construction Prices m/m, UK MPC Member Haldane Speaks
The UK economy showed a slow growth pace in the first quarter of the year, the weakest performance among European and G7 countries. The ONS reported that the country's GDP growth matched previous estimates of 0.2% in the Q1 of 2017, compared to a 0.7% increase in the Q4 of 2016. Both business services and construction sectors contributed to the Q1 UK economic expansion.
The British economy, which successfully withstood in the Brexit vote aftermath, started to lag behind other developed countries. Economic growth in the Q1 weakened amid a slowdown in the consumer-focused industries, such as accommodation and retail sales, as well as diminished household spending power. Consumers' real income faced the most prolonged squeeze as price growth beat wage growth. Overall, trends in the main areas of the country's economy are set to be crucial for the Bank of England to decide whether to raise its key interest rates in the second half of the year or not. However, higher demand for UK exports and stronger manufacturing activity can potentially offset weak consumer spending.
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Traders await events from US and UK
The most significant economic event from the United States in this trading session is the US ISM Manufacturing PMI being published at 1400 GMT. The given index is based on surveyed purchasing managers in the manufacturing industry, thus it may demonstrate some new developments in terms of the health of the US economy. Moreover, BOE's Chief Economist Andy Haldane is set to deliver closing remarks at the Bank of England's research conference in London at 1730GMT.
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GBP/USD has lost upside momentum
GBP/USD was not able to maintain its upside momentum, resulting in a fall down to the 55-hour SMA. Subsequently, the pair returned near Friday's upside limit circa 1.3030 and depreciated once more down to the 55-hour SMA. Technical indicators suggest that the Pound may still respect the boundaries of the ascending channel in this trading session, but the 1.3050/60 area may limit its gains. The upside trend is non-existent at this point; thus a possible move sideways should breach the bottom channel line on Tuesday. The Pound may find support at the 55-hour SMA once again; however, bearish sentiment may prevail and push the British currency below the given level. In case of strong downside risks, the rate is likely to be supported by the 100-hour SMA near 1.2950.
Hourly chart
The pair has approached the upper Bollinger band circa 1.3050 and changed direction, demonstrating that downside risks may prevail in this session. The nearest support is formed by the monthly PP and the 55-hour SMA near the 1.2882 mark. This level, however, is unlikely to be reached today. On the upside, the immediate resistance is provided by the 38.2% Fibo at 1.3121.Daily chart
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Bearish sentiment prevails
SWFX traders are bullish on the pair, as 58% of all open positions are long (57% on Friday). In addition, 59% of set up orders are to buy the Pound.
On the contrary, traders at Saxo Bank are bearish on the Sterling, with 66% of traders holding short positions (67% previously). Moreover, OANDA clients share the same percentage of bearish sentiment.
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 56% (+2%) of survey participants share this belief. The current spot price is around 1.2975, while the average forecast for October 3 is 1.2775 (1.2791 on Friday). The 1.24-1.26 range remains the most popular price interval, having 25% of the votes.