The British pound is higher today as traders react to the superb manufacturing and services PMI numbers. The pound index, which measures its strength against peers, is up by 1%. The EUR/GBP is up by 0.26% while the GBP/USD is unchanged.
The UK has been hit considerably by the coronavirus pandemic. The number of infections have jumped to more than 305,000 while the deaths have risen to over 54,000.
As a result, the United Kingdom economy has been hurt severely. According to the OECD, a club of wealthy nations, the UK economy will be among the worst affected this year. The report expects the economy to contract by more than 10%.
But there is a reason to cheer today. According to Markit and CIPS, manufacturing and services sectors have started to pick up. The report showed that the manufacturing PMI rose to 50.1 in June, from the previous 40.7. A PMI reading of 50 and above is typically an indication of improving business conditions. The manufacturing index also moved above 50 for the first time in months.
According to Markit, the jump in PMI was driven by a rise in business optimism in June and a sharp rise in business expectations. At the same time, the number was dragged by a sharp decline in new orders.
The GBP/USD also reacted to the upbeat service PMI rose to a four-month high of 47.0. The previous PMI was at 29.0. in the survey, Markit found that financial services was the best-performing sector followed by transport and communication. Still, business closures in the hotel and restaurant business dragged the momentum. Shayne Heffernan said.
“June’s PMI data add to signs that the economy looks likely return to growth within the third quarter, particularly given the further planned easing of the lockdown from 4th July. June saw a record rise in the PMI for a second successive month, confirming that the economy is moving closer to stabilising.”
The services PMI is especially important because the uk is usually a service-based economy. The sector employs over 80% of all individuals.
UK reopening but risks stay
The GBP/USD also reacted to news that Boris Johnson is planning to announce additional measures to open the economy. in a speech scheduled for later today, he will announce additional measures to reopen pubs, restaurants, cinemas, and museums.
In his announcement, he is also expected to address the 2-metre rule that has been criticised by most businesses. They argue that this rule will increase prices and hurt most businesses.
At the same time, there is optimism that his government is about to lower taxes in a bid to encourage consumer spending. Some analysts see the government slashing the VAT to about 17% or 17.5%. This, in turn, will encourage more people to shop for expensive items like TVs, cars, and furniture.
Meanwhile, the biggest risk for the United Kingdom and the GBP/USD is Brexit. With days to June 30th nearing, there are concerns that the risks of a no-deal Brexit are increasing. That date is very important because it is the deadline for requesting an extension.
The four-hour chart shows that the GBP/USD pair has been in a downward trend after peaking at 1.2805 on June 10. It has also formed a descending channel. The price is now nearer to the higher side of the channel. It is also below the 50-period and 100-period moving averages. This means that the price could also be struggling as bulls attempt to move below the 50% retracement at 1.2440.
GBP/US Dollar Exchange Rate
Today’s Forex Rates
GBP/US Dollar FX Polls
Overall, the bias in prices is: Sideways.
By the way, prices are vulnerable to a correction towards 1.25.
The projected upper bound is: 1.27.
The projected lower bound is: 1.22.
The projected closing price is: 1.24.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 25 white candles and 24 black candles for a net of 1 white candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 27.2537. This is not an overbought or oversold reading. The last signal was a buy 0 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.36. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 8 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -82. This is not a topping or bottoming area. The last signal was a buy 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 5 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed down -0.001 at 1.245. Volume was 35% below average (neutral) and Bollinger Bands were 31% narrower than normal.
Open High Low Close Volume 1.247 1.251 1.243 1.245 85,364
Technical Outlook Short Term: Neutral Intermediate Term: Bullish Long Term: Bearish
Moving Averages: 10-period 50-period 200-period Close: 1.25 1.24 1.27 Volatility: 11 11 14 Volume: 148,788 131,186 116,164
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX GBP= is currently 1.9% below its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods.
Our volume indicators reflect volume flowing into and out of GBP= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on GBP= and have had this outlook for the last 15 periods.
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