- 59% of all pending orders are to sell the Pound
- 52% of traders hold long positions
- The nearest resistance is located at 1.3163
- Support is at 1.3011
- 57% of traders reckon GBP/USD will be at 1.32 or lower in three months
- Upcoming events: US Markit Services PMI, US CB Consumer Confidence, US New Home Sales
More bad news for a post-Brexit Britain came as the July's flash manufacturing PMI figure fell dramatically against the June figure and missed expectations. This was one of the first PMI readings to have responses taken after the UK voted to leave the European Union on June 23. Markit's Purchasing Managers' Index in manufacturing fell to 49.1 points during the seventh month of the year, down from the 52.1 in June, when it had rebounded from its second-lowest level in the past 15 months and booked a fresh five-month top. Market consensus had been for a 50-point print in July.
Meanwhile, a separate report showed that activity in the country's services arena faltered to 47.4 during the reported month, steeply lower than 52.3 seen previously. That was the 88-month low or the lowest level since the economic crisis of 2009. Analysts had penciled in a deceleration to 49.2 points in July. The 50-point level marks the line between contraction and growth and the index has been volatile since the beginning of the year. The UK economy has been under pressure as Brexit-related uncertainty darkened the outlook for businesses. In the referendum last month, Britain voted to divorce the European Union, sending shock waves across global financial markets.
Focus turns to US fundamentals on Tuesday
Today attention should be paid to the US Markit Services PMI and the New Home Sales figures. The Services PMI capture business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in US. As for the New Home Sales, they are an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes so as a result the demand for goods, services and the employees is stimulated. Another possible event is the US CB Consumer Confidence, which captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion, while a low level drives economic downturn. This event could have some impact on the US Dollar.
GBP/USD risks breaking the 1.31 psychological support
Once again the GBP/USD currency pair failed to fall below the 1.31 major level, remaining almost completely unchanged on Monday. However, the Cable is expected to experience more pressure today, with risks of the 1.31 mark getting breached now higher. Even though technical studies are neutral in all timeframes, a bullish development is unlikely, as the cluster, represented by the 20-day SMA and the weekly PP, keeps providing strong immediate resistance at 1.3163. A close above the 1.31 major level is still possible, unless losses exceed 40 pips, whereas the nearest support remains out of reach at 1.3011.
Daily chart
As the Cable was consolidating on Monday, it managed to preserve the descending channel pattern. In case bears prevail today, we might see the channel's lower boundary being put to the test, but a drop lower is doubtful, due to lack of impetus. The channel has the potential to last until Thursday, with a possible dovish FOMC statement on Wednesday acting as a catalyst for a rally towards the channel's resistance line.
Hourly chart
Bulls remain in control
Bullish sentiment keeps fading away, as today 52% of traders hold long positions, compared to 55% on Monday. There is also a decent portion of orders to sell the Pound, namely 59% (previously 73%).
Compared to Monday, there are slightly more bulls at OANDA - they take up 55% of the positions open with the Canada-based broker (previously 57%). Sentiment at Saxo Bank remains somewhat neutral, as here the number of bears exceeds the number of bulls by only 2 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.32 in three months
More than half of traders (57%) believe the British currency is to cost 1.32 or less dollars after a three-month period. The most popular price intervals was selected by only 21% of the voters, namely the 1.28-1.30 one, while the second most popular choice implies that the Sterling is to cost between 1.24 and 1.26 dollars in three months, chosen by 19% of the surveyed. At the same time, the mean forecast for Oct 26 is 1.3261.