The British pound started this week on a positive note after the greenback got weaker on Friday due to NFP data. The GBP/USD pair gained more than 50 pips on the day and marked daily highs near 1.3900 handle, where it found fresh sellers that dominated the market.
- GBP/USD started the week with a rise but couldn’t hold the gains.
- The upbeat UK data gave temporary support to the pair.
- US ISM Services PMI, FOMC meeting minutes, and BoE Bailey speech are key events that can weigh on the pair.
- Technically, bears are getting stronger and may push the market further down the road.
As of writing, the price is under the 1.3850 area, the same zone where bulls had taken over today.
GBP/USD fundamental forecast: upbeat UK data couldn’t help the pound
According to IHS Markit data released on Monday, July 6, the UK services sector showed a surge in business activity in June. The upbeat data came on the back of increased demand that helped to ease off restriction.
Moreover, the CIPS services purchasing manager index came at 62.4 for June, slightly higher than May at 62.9. However, the current value is the highest so far since October 2013. Further, the value came more heightened than the preliminary estimate of 61.7.
The index remained above the 50.0 marks in June for the fourth consecutive month. However, there was a mild decline in exports amid restrictions on international travel and uncertain quarantine policies. Another upside in fresh orders helped to boost the productivity of the services sector.
Despite a steady rise in employment, businesses find it tough to fulfill the current volume of orders. Nonetheless, the employment rate is at its peak since June 2014.
The prices and the inputs helped to raise inflation in June. The service providers observed that the rise in raw material, increased salaries, and higher cost of transportation were the key variables that contributed to an increase in prices.
Delta variant weighing on GBP/USD
Despite a recent statement by Sajid Javid (UK Health Secretary) to remove restrictions on July 19, the fear of prolonged lockdown continues to disturb business confidence. As the number of cases and hospitalization increases, we cannot say whether the UK PM will allow lifting restrictions on July 19 or impose another lockdown.
Moreover, we have no solid data to learn whether the current vaccination is good enough to combat the virus’s Delta variant.
What’s next for GBP/USD this week?
We have the following events that can impart a significant impact on the GBP/USD this week.
US ISM Services PMI
We have US ISM Services PMI data due today that may provide fresh impetus to the market, expecting the index data for June at 63.4 against the previous 64.0. Although the difference between both figures is not significant, any surprising number can shake the market.
FOMC meeting minutes
Fed meeting minutes are very significant as we have to determine the Fed’s stance over the recent labor market report that showed a rise in unemployment despite adding 850k jobs in the economy. Moreover, it indicates that the Fed can hint at a delay in monetary policy tightening, giving a positive edge to the GBP/USD.
BoE Governor’s speech
On Friday, the BoE Governor will speak. He can hint to the market about probable rate forecasts and monetary policy tightening in light of the recent economic situation in the UK.
GBP/USD technical view: will bears dominate again?
The 4-hour chart indicates a bearish reversal as the price found stiff resistance near the 1.3900 area. In addition, the price has fallen back below the 20-period SMA. Meanwhile, the volume shows a neutral stance to bulls, but bears have yet to establish their footprints. The RSI is near the 50.00 mark, which is also a neutral to bearish signal.
It looks like a daily close below yesterday’s lows of 1.3815 will signal a clear bearish dominance, while any close beyond 1.3850 will be a revival for the bulls.