Yesterday’s trade saw GBP/USD within the range of 1.5778 – 1.5690 to settle 0.2% lower at 1.5710.
At 07:19 GMT today GBP/USD was down 0.06% to trade at 1.5701. The cross held in a daily range of 1.5676 – 1.5716 and is down 0.8% for the week so far.
Fundamentals
United Kingdom
Activity in Britain’s sector of manufacturing probably grew at a faster pace in June compared to a month earlier, with the corresponding final PMI reading expected to come in at 52.5 from 52.0 in May. If confirmed, this would be the 27th straight month of expansion in the sector.
The index is based on a survey encompassing managers of about 600 companies that operate in the sector of manufacturing. They are asked about their estimate in regard to current business conditions in the sector in terms of new orders, output, employment, demand in the future. Values above 50.0 signify that respondents are rather optimists than pessimists, while a reading below the level 50 threshold indicates an overall contraction in activity during the tracked period. Higher-than-projected PMI readings would boost demand for the sterling. The Chartered Institute of Procurement & Supply (CIPS) is expected to publish the official reading at 08:30 GMT.
United States
Factory activity growth in the US, on the other hand, likely slowed down in June, Markit Economics is expected to report at 13:45 GMT. The final manufacturing PMI is projected to confirm a preliminary estimate of 53.4 released on June 23rd, which was the lowest since October 2013, from a final reading of 54.0 in May.
Chris Williamson, Chief Economist at Markit commented on the preliminary report: “The slowdown is being led by deteriorating export performance, which many producers in turn linked to a loss of competitiveness caused by the stronger dollar. Although stabilizing in June after declining in April and May, export orders have not shown any growth since February… The survey results will add to further worries about the damaging impact of the strong dollar, and encourage the Fed to be cautious in terms of the timing the first interest rate hike.”
ISM data
A separate and more widely tracked report on US factory activity is expected to show a slight improvement in sector growth in June. The ISM Manufacturing PMI may have risen to 53.1 last month after coming in at a better-than-expected 52.8 in May. The gauge had dropped to 51.5 in March and April, the lowest since May 2013. While the new orders and employment sub-indexes improved in May, the production sub-index decreased.
The ISM Manufacturing PMI is a compound index, which represents manufacturing activity in 18 different industries. It is comprised of four equally-weighted components: seasonally-adjusted employment, seasonally-adjusted production inventories, seasonally-adjusted new orders and supplier deliveries. The index is based on a survey of 300 purchasing managers.
Participants can either respond with “better”, “same”, or “worse” to the questions about the industry, in which they operate. The resulting PMI value is measured from 0 to 100. If the index shows a value of 100.0, this means that 100% of the respondents reported an improvement in conditions. If the index shows a value of 0, this means that 100% of the respondents reported a deterioration in conditions. If 100% of the respondents saw no change in conditions, the index will show a reading of 50.0. Therefore, readings above the key level of 50.0 are indicative of expanding activity in the sector. In case the PMI accelerated more than anticipated, this would have a bullish effect on the greenback. The Institute for Supply Management (ISM) is to release the official reading at 14:00 GMT.
Employment
Also due today are a set of employment indicators. The number of corporate layoffs in the US likely fell to 35 500 in June, Challenger, Gray, & Christmas is expected to report. The Challenger Job Cuts indicator registered a reading of 41 000 in May, down from 61 600 in April.
The report provides monthly information on the number of corporate layoffs by industry and region and serves as a gauge for investors to assess the strength of the countrys labor market. The data are due out at 11:30 GMT.
Meanwhile, employers in the US non-farm private sector probably added 218 000 new jobs in June, according to the median estimate by experts, following 201 000 new positions opened during May.
The employment report by Automated Data Processing Inc. (ADP) is based on data that encompasses 400 000 – 500 000 companies employing over 24 million people, working in the 19 major sectors of the economy. The ADP employment change indicator is calculated in accordance with the same methodology, which the Bureau of Labor Statistics (BLS) uses. Published two days ahead of the governments employment statistics, this report is used by traders as a reliable predictor of the official non-farm payrolls data. Creation of jobs has a direct link to consumer spending, while the latter is a major driving force behind economic growth. In case new jobs growth came in above expectations, this would bolster demand for the US dollar. The official figure is scheduled to be published at 12:15 GMT.
Pivot points
According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.5726. In case it penetrates the first resistance level at 1.5762, it will encounter next resistance at 1.5814. If breached, upside movement may attempt to advance to 1.5850.
If the cross drops below its S1 level at 1.5674, it will next see support at 1.5638. If the second key support zone is breached, downward movement may extend to 1.5586.
In weekly terms, the central pivot point is at 1.5776. The three key resistance levels are as follows: R1 – 1.5887, R2 – 1.6021, R3 – 1.6132. The three key support levels are: S1 – 1.5642, S2 – 1.5531, S3 – 1.5397.
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