UK Construction PMI preview: What to expect of GBP/USD?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 3, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - The cable is seen wavering on the bids since early Europe, although failed near 100-DMA at 1.5445 and drifted slightly lower to now trade around 1.5430 levels. The pound remains supported versus its American counterpart amid broad based US dollar retreat. Further, the bulls continue to ride higher on the back of the recent upbeat UK manufacturing PMI report published on Monday.

    Looking ahead, attention shifts towards the UK construction PMI reading due to be reported at 09.30GMT.

    New work orders likely to ease further in Oct?

    The business activity in the UK construction sector is seen decelerating in Oct to 58.9 points, after witnessing a sharp acceleration in output levels to 59.9 in Sept, the fastest increase since February.

    The main focus will be on two of three sub-indexes, the new work orders and jobs creation, after the new business growth continued to ease from June’s peak and recorded the slowest pace of increase in five months previously. While the jobs creation sub-index ticked up to three-month highs. Also, what needs to be seen is whether the residential building activity continues to remain the best performing broad category of construction activity in September.

    Craig Erlam, Analyst at OANDA believes, “the U.K. construction PMI will be of interest this morning given that the sector was a drag on output in the third quarter. The PMI has been gradually improving in recent months and hit 59.9 in September, with new projects increasing the need for more employment. The biggest issue facing the industry now appears to be a skills shortage which could affect productivity following such a prolonged slowdown during the financial crisis but overall conditions are improving. If that can continue in the coming months, as it is expected to in October, construction may contribute to GDP in the final quarter rather subtract from it again.”

    GBP/USD: Key levels to watch on data

    The pair hovers around 1.5430 levels and should the PMI report surprise on the upside, the prices could the prices could head higher towards the resistance placed at 1.5444/50 (100-DMA/ psychological levels) above which gains could be extended to 1.5500 (round number). A breach of the last, the prices would attempt 1.5531 (Sept 22 Low). On the flip side, if the data misses expectations, the pair could drop to the immediate support seen at 1.5412 (1h 50-SMA/ today’s low) below which it could extend losses to 1.5363/59 (200-DMA/1h 200-SMA). Selling pressure will intensify below the last, dragging the prices towards 1.5302/00 (Oct 30 Low/ psychological levels).
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