GBPUSD An Unsuccessful Attempt to Regain Momentum

Following two impressive fundamental performances to begin the week, it appeared the GBP bulls were looking to regain some of their lost momentum from the past few weeks. For example, Monday’s Construction PMI came in at 62.4, where economists were expecting a fall to 62.0. Additionally, Tuesday’s UK Services PMI (around 70% of the UK GDP) rose to a nine-month high. The Services PMI reading rose to 59.1, surpassing expectations for 57.9.

Unfortunately for the GBP bulls, Wednesday’s announcement that Industrial and Manufacturing Production fell below expectations denied the GBPUSD any chances of a comeback. Further losses were felt when the Bank of England (BoE) left monetary policy unchanged on Thursday, alongside Friday’s news that the UK Trade Deficit widened slightly in June.

Next week is a critical week for the GBPUSD. On Wednesday, the latest UK Jobless Claims are announced. Bearing in mind that BoE Governor, Mark Carney has hinted that a UK unemployment rate below 6% might influence the BoE’s decision to raise interest rates, this is not a release to miss. At present the UK unemployment rate is stated to be around 6.5%, but there is a reason to be cautiously optimistic Wednesday’s UK Jobless Claims. As mentioned above, the UK Services PMI was recently recorded at a 9-month high. The UK Services sector is also responsible for 80% of the UK labor force. If the UK unemployment rate is announced as having declined on Wednesday morning, then expect the GBP bulls to take notice.

Also next Wednesday, the scheduled BoE Inflation Report will feature a speech from Governor Carney. Part of the recent GBPUSD decline has been correlated by investors losing patience with the BoE, with the Central Bank were accused of sending contradictory messages regarding the timing of a BoE rate hike. Carney is reportedly going to provide clarity on this issue on Wednesday. On Friday, the second estimate of the UK GDP Q2 is announced.

The technicals on the Daily timeframe currently show the Cable being traded in a downward channel. However, if there is high optimism following the UK data on Wednesday, expect this channel to be tested. At the beginning of the week, there is a low volume of UK releases. In addition with the possibility that investors should be attracted to the USD as a safe-haven, following an escalation of political tensions in the Middle East – this pair looks likely to begin the week moving lower. Support can be found at 1.6782 and 1.6760.

Upside moves can will find resistance levels located around 1.6845 and 1.6888. Both the Stochastic Oscillator and RSI appear to edging very close to the oversold boundaries, indicating that the GBPUSD’s recent selling might be heading for a conclusion.