Better than expected UK construction PMI might provide better entry to sell pound

Though fundamentals such as monetary policy expectations are shifting in favor of pound, pound in the short term likely to remain short.

• First call was provided to go short on pound around 1.576 with stop loss around 1.582 and 1.595 area targeting 1.548 and 1.532 area. Pound is currently trading at 1.558.

Pound has dropped after it failed to clear resistance around 1.58 area.

Better than expected first quarter GDP figure (growing 2.9% y/y) failed to boost pound.

Furthermore pound has cleared key support against dollar around (1.565 area) after June PMI (51.5) surprised to downside.

Trade recommendation -

• One might still go short on the above trade with mention stop loss area, however it is better to wait for the construction PMI at 8:30 GMT, since it might provide better entry for sell. However one should remain cautious as US NFP report is likely to add heavy volatility to dollar leg.
  
• It would be better to short around 1.564-1.566 area to go short on pound. For those who are looking to play safe, might even wait for the pay roll report to pass and reconsider the trade.

UK construction PMI -

• Housing and real estate sector is of immense importance to UK. So construction PMI is naturally a key figure that would be close watched by economists and market participants.

• In June UK house prices dropped by -0.2%.

• In April, construction PMI was at 55.9. Today median expectation is at 56.5 for May.