- The share of buy orders slid from 65 to 55%
- 68% of all open positions are long
- The nearest resistance is located at 1.3312
- Support is at 1.3230
- 51% of traders reckon GBP/USD will be at 1.40 or higher in three months
- Upcoming events: UK Services PMI, BoE Governor Carney Speech, BoE Financial Stability Report, US Factory Orders, FOMC Member Dudley Speech
June was the worst month in seven years period for the Britain's builders since construction PMI entered a contraction territory, being affected by uncertainty over the results of the EU membership referendum. According to the data, the UK construction PMI index for the previous month was much weaker than expected slipping to 46.0 points, from 51.2 mark previously, and compared with an forecasted figure of 50.5. Moreover, following number was the first reading below 50.0 mark since April 2013 and the weakest level since the middle of 2009 as uncertainty covered the sector. Although, there are strong expectations of a further decline in next month's data. The main reasons for the following decline are the harsh drop in residential building as well as reduction in commercial work for the first time since May 2013. Although, residential construction activity went down at the fastest pace since December 2012. Civil engineering activity, in turn, remained broadly stable.
In the meantime, Bank of England Governor Mark Carney highlighted during the previous week's conference that he suppose the central bank would have to provide more incentives for the Britain's economy over the summer in order to get rid of the referendum's results shock.
UK Services PMI, US Factory Orders and BoE Head's Speech
Tuesday brings slightly more data than Monday, such as the UK Services PMI. The Services PMi is an indicator of the economic situation in the UK services sector. It captures an overview of the condition of sales and employment. It is worth noting that the UK service sector does not influence, either positively or negatively, the GDP as much as the Manufacturing PMI does. Traders want the highest possible reading as that will be taken as positive for the GBP. However, the most impact is likely to be from the BoE Governor's Speech later today. As head of the central bank, which controls short-term interest rates, he has more influence over the nation's currency value than anyone else. A hawkish statement from him could boost the Pound. Another event is the US Factory Orders, which are a measure of the total orders of durable and non-durable goods, such as shipments (sales), inventories, and orders at the manufacturing level, which can offer insight into inflation and growth in the manufacturing sector.
GBP/USD remains on the back foot
en though the GBP/USD currency pair somewhat managed to rebound on Monday, it was still stuck between the 1.3230 level and the weekly PP at 1.3312. Technical indicators are giving bearish signals today, suggesting that a decline is due, but a lot depends on BoE Governor's speech today, as his statement could prompt another Sterling sell-off or trigger a buying spree. In either case the Pound is expected to leave its trading range, but with the bearish development most likely prevailing. Due to the breach of the 1.3230 level, the next support will be the weekly S1, located at 1.3090.
Daily chart
The Sterling failed to being recovering after having slumped on the 24th of June, as the trend-line indicates a short-term bearish development on the hourly chart. The 200-hour SMA also keeps sliding down, only bolstering the resistance area, suggesting that more weakness is likely to come.
Hourly chart
Bulls remain in control
There are significantly more traders having a positive outlook towards the Cable today, as 68% of all open positions are long (previously 56%). The share of buy orders, however, slid from 65 to 55%.
Compared to Monday, there are also slightly more bulls at OANDA - they take up 61% of the positions open with the Canada-based broker. Sentiment at Saxo Bank turned bullish, as here the number of bulls exceeds the number of bears by 20 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.40 in three months
More than half of traders (51%) believe the British currency is to cost 1.40 or more dollars after a three-month period. The most popular price intervals was selected by slightly less than a fifth (13%) of the voters, namely the 1.36-1.38 one, while the second most popular choice implies that the Sterling is to cost either between 1.28 and 1.30 dollars or between 1.40 and 1.42 dollars in three months, both chosen by 12% of the surveyed. At the same time, the mean forecast for Oct 05 is 1.4052.