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

The UK economy will release its August construction PMI later in the European session, with the figure expected to stay in contraction, although accelerate slightly to 46.6, better than the previous 45.9 result.

Having rebounded from July’s worst reading since the middle of 2009, the UK’s construction sector is expected to extend its recovery mode into August. July’s disastrous reading had a significant impact on the markets, as it was the first construction PMI compiled entirely after the EU referendum result. The weak numbers were led by a steep and accelerated decline in commercial building.

Should the PMI reading match or beat expectations, we could see GBP/USD advancing further beyond 1.33 handle. Contrarily, the cable could retrace further towards 1.32 barrier on disappointing results. However, the reaction to the data may be short-lived as the main risk event for today remains the US NFP report.

GBP/USD: Technical levels

Haresh Menghani, Analyst at FXStreet notes, “The pair has decisively cleared 50-day SMA and a short-term descending trend-line resistance but failed to build on to its strong bullish momentum above 1.3300 handle to clear an immediate strong resistance near 1.3330-35 marked by 23.6% Fibonacci retracement level of Brexit-led sharp slide. This 1.3330-35 area might continue to act as an important resistance, which if cleared should boost the pair immediately towards August monthly high resistance near 1.3370 level before the pair eventually makes an attempt to reclaim 1.3400 handle and head towards testing July monthly high resistance near 1.3475-80 region.”

“Meanwhile on the downside, the descending trend-line break-point near 1.3235-30 zone now seems to protect immediate downside, which if broke is followed by 50-day SMA strong resistance turned important support near 1.3140 region.”