Global macro overview for 04/10/2017:
The UK PMI Construction data were worse than expected for the first time in 13 months. According to IHS Markit, the Construction PMI for September was at the level of 48.1, while market participants expected a figure around 51.1 points. A drop below fifty means this sector of UK economy is now contracting rather than expanding.
September data revealed a difficult month for building companies, as new projects failed to materialize to replenish jobs planned before the Brexit referendum. The drop in workload was attributed to fragile confidence and subdued appetite for risk, especially in the commercial building sector. Lower volumes of construction work reflected falls in both commercial and civil engineering activity during September. The reduction in civil engineering work was the steepest for almost 4,5 years, which some firms linked to a lack of new infrastructure projects to replace completed contracts. The only broad area of construction activity to register an expansion in September was home building. However, growth momentum eased to a six-month low amid reports citing worries about less favorable market conditions ahead. New business volumes dropped for the third consecutive month in September, thereby suggesting a continued shortage of work to replace completed construction projects. In conclusion, the data also follow a softer manufacturing survey for September – with both combining to suggest the British economy is faltering, which sooner or later will affect the British Pound in a negative way.
Let's now take a look at the GBP/USD technical picture at the H4 time frame. The price is trading right on the golden trendline support around the level of 1.3250. So far both bulls and bears are not giving up because a failure here would lead to a drop to the level of 1.3160 or a rebound towards the level of 1.3327. Oversold market conditions indicate a possible rebound towards the next target at 1.3327.
