The GBP/USD started the week with a decent gain, which sent the currency pair to levels not seen since June 21st. The move on the upside was helped by the broad increase in the demand for riskier assets as well as by the better-than-expected data, released for the British economy. On Monday the manufacturing PMI figures surprised on the upside, coming at 48.6, a reading much higher than the one for May. The number was even better than what most analysts were expecting. On Tuesday, however, the pound pared some of the gains it had posted the day before as data for the construction sector disappointed. While economists were expecting a modest decline to 53.1 from 54.4, the figures came at 48.2, indicating that the construction sector contracted in June. After the news, the GBP/USD declined, but in the afternoon moved slightly higher, helped by the gains of the local stock market. Today the pound is moving sharply lower after the services PMI reading also came in at the rather low level of 51.3. Analysts’ expectations consolidated around a number of 52.9, a much more modest drop from the May reading of 53.3. As investors chose to shy away from high-yielding assets and put their money in safe havens, the bulls retreated from the currency pair and gave way to the bears, which send the GBPUSD to rates of 1.5588.
Technically speaking, the currency pair is in a golden cross formation, but, since the pound continues to move in a rather trendless fashion, it will be unwise to rely solely on this indication to go long the British currency. The 200-period moving average continues to act as a major level, at which both bulls and bears become active. First the indicator acted as a resistance, but after the bulls pushed the GBP/USD above it on Friday, it is acting as a support. We are currently testing this support, but we see a sustainable break below it as highly unlikely as traders are expecting tomorrow’s ECB statement as well as the big news, coming from the U.K. The 25-period moving average and its 50-period counterpart acted as intermediate support levels, but as we broke below them today we will probably see them acting as a resistance on the way up. Oscillators are mixed with the relative strength index in mid-range at 39, while the stochastic is in oversold territory at 14. The MACD is slightly above the key 0 level.
The rest of the week is filled with important economic releases, which might prove to be of significant importance for the future trend in the GBP/USD. Tomorrow we have the much anticipated rate announcement of the ECB, but before that Bank of England is expected to release its official bank rate. Analysts are expecting the rate to remain unchanged. The Bank of England is scheduled to speak on its asset purchase facility also, with economists pricing in an increase in the total value of money, allocated to purchasing assets in the open market. Investors should watch carefully the employment and non-manufacturing PMI figures for the U.S. economy, which will be announced later in the day. Spanish and French governments will also be in the news as they are scheduled to auction a fresh new batch of 10-year bonds, whose yields will be closely monitored by market participants. On Friday more data is pouring out, again pertaining to the British and American economies. For the U.K., PPI Input will be announced as well as the Halifax home price index. For the U.S., more employment data is coming with the closely watched non-farm employment change and unemployment rate.
Disclaimer:
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.
