GBP/USD drops ahead of UK and US services data
Fawad Razaqzada June 4, 2018 1:25 PM
It has been a day of two halves for the US dollar. The greenback was initially lower and sharply so against some commodity currencies, before bouncing back in the second half of today’s session – most notably against the British pound but also versus the Swiss franc and the Japanese yen.
It has been a day of two halves for the US dollar. The greenback was initially lower and sharply so against some commodity currencies, before bouncing back in the second half of today’s session – most notably against the British pound but also versus the Swiss franc and the Japanese yen. Commodity currencies were still outperforming however, no doubt boosted by the ongoing risk-on rally. Indeed, Wall Street’s rally continued in the wake of Friday’s strong jobs data and despite ongoing concerns that the decision by the US to impose tariffs on steel and aluminium imports from the EU, Canada and Mexico could spark a trade war.
The GBP/USD will remain in focus tomorrow as the May PMI data from the services sectors of both the UK and US are released. The UK PMI is expected to come in at 52.9, which would be more or less the same level as in the previous month, while the US version is seen rising almost one whole to 57.9. Ahead of these services PMI figures, we had the UK’s construction PMI released earlier today which came in just ahead of forecasts at 52.5, unchanged from April. From the US, factory orders came in weaker than expected, showing a 0.8% drop instead of 0.4% for the month of April. This hardly had any impact on the dollar, however.
From a technical point of view, the GBP/USD’s well-entrenched bearish trend remains intact. This was highlighted by its failure to even take out the first of its key resistance level, at 1.3400. As soon as it tested this level, it went on to drop 100 pips in a short space of time, cause the daily candle to turn red from green. If it closes around the current levels of 1.3300/10 or lower then it will have formed an inverted hammer candlestick pattern on its daily, which is typically a bearish sign. So, as things stand, the cable still remains on course to head lower, possibly towards the 50% or 61.8% retracement levels at 1.3182 and 1.2900 respectively. Resistance meanwhile comes in at 1.3400, as mentioned, followed by 1.3460 and 1.3500. The short-term technical bias would turn bullish only when a prior swing high is taken out, in this case at 1.3610, unless we see a distinct bullish reversal at lower levels first.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.