According to data provided by Markit today, the index of supply managers (PMI) for the UK construction sector fell in June (54.8 against 56.0 in May and 55 according to the forecast). Nevertheless, the pound reacted rather sluggishly to this data. In June, there is a weakening of the growth momentum in the UK construction sector, according to Markit, however, the PMI index remains above the level of 50, indicating an increase in activity. The slowdown in activity is generally observed in the UK economy (due to the "renewal of the rejection of risk", as stated in the report of Markit) amid concerns about economic and political uncertainties in the country. This is the lowest level of optimism about the prospects for the UK economy since December 2016.
This Markit report goes against the statement of Bank of England Governor Mark Carney, made during his speech at the forum of the European Central Bank in Portugal at the end of June. Mark Carney said that "a partial waiver of incentive measures is likely to be necessary, since the Bank of England will no longer have to compromise, and the decision-making process will enter the normal course".
Now market participants will wait for the meeting of the Bank of England in August, and it is not excluded, according to Mark Carney's statement, that the rate will be increased by 0.25%. Expectations of this development support the buyers of the pound. This week, the markets will study the data on industrial production and foreign trade of Great Britain (for May), which will be released on Friday, to understand how the growth in production in the country meets the expectations of economists.
Today in the US, a day off (Independence Day), low trading volumes and activity of traders will continue until tomorrow, when Asia opens. Nevertheless, the dollar is now increasing its positive dynamics after yesterday's growth amid strong production data.
The Institute for Supply Management (ISM) said on Monday that the Purchasing Managers Index (PMI) for the US manufacturing sector rose to 57.8, the highest level since August 2014.
Now, market participants will closely monitor the publication on Wednesday (18:00 GMT) of the minutes from the last FOMC meeting of the Fed and the US labor market data for June, which are published on Friday 12:30 (GMT).
It is expected that the Fed will confirm the continuation of tightening of monetary policy. The probability of another rate increase in 2017 is estimated by investors at 62%, according to the CME Group.
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Support and resistance levels
Nevertheless, the pair GBP / USD remains positive, trading above the short-term 1.2885 (EMA200 on 1-hour), 1.2830 (EMA200 and the bottom line of the uplink on the 4-hour chart) and medium-term 1.2815 (EMA200 on the daily chart) support levels.
The GBP / USD pair since early 2017 continues to rise in the uplink on the weekly chart. If the positive pound dynamics continues, then the GBP / USD pair will continue to rise with the targets of 1.3050 (May highs), 1.3100, 1.3210 (Fibonacci level of 23.6% correction to the GBP / USD decline in the wave, which began in July 2014 near the level of 1.7200 and The upper limit of the ascending channel on the daily chart). Through the level of 1.3210 also passes the upper limit of the rising channel on the weekly chart.
Positive dynamics in the pair GBP / USD so far remains.
Nevertheless, the OsMA and Stochastic indicators on the 4-hour, daily charts turned to short positions.
An alternative scenario is to reduce the pair GBP / USD to support level 1.2815. In the case of breakdown of the support levels 1.2735 (EMA144 on the daily chart), 1.2640 (June lows and the lower limit of the uplink on the daily chart), the GBP / USD pair will accelerate towards targets near the 1.2550 level (the lower limit of the uplink on the weekly chart), 1.2365, 1.2110.
Support levels: 1.2885, 1.2830, 1.2815, 1.2735, 1.2700, 1.2640, 1.2550, 1.2485, 1.2365, 1.2110
Resistance levels: 1.3050, 1.3100, 1.3210, 1.3300
Trading Scenarios
Sell Stop 1.2910. Stop-Loss 1.2970. Take-Profit 1.2885, 1.2820, 1.2735, 1.2700, 1.2640, 1.2550, 1.2485
Buy Stop 1.2970. Stop-Loss 1.2910. Take-Profit 1.3050, 1.3100, 1.3210, 1.3300
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