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

The UK economy will release its May construction PMI later in the European session, with the figure expected to stay in expansion at 52.6, slightly better than the previous 52.0 result.

Having declined to a three-year low in April, the UK construction sector activity is likely to pick up pace, as slack in employment generation in the building industry is likely to wane in light of recovering demand in residential buildings space, while commercial building is expected to grow at steady pace.

However, a downside surprise cannot be ruled out given softer growth forecasts for the UK economy alongside uncertainty ahead of the EU referendum. Should the PMI reading match or better expectations, we could see GBP/USD advancing further towards 1.45 handle, added to the bullish sentiment spurred by upbeat manufacturing PMI report published yesterday. Contrarily, the cable could revert towards almost two-week lows below 1.44 barrier on disappointing results.

GBP/USD: Technical levels

Haresh Menghani, Analyst at FXStreet notes, “Immediate resistance is pegged near 1.4480-1.4500 handle, beyond which the pair could attempt to extend the recovery towards 1.4540 resistance. This 1.4540 resistance now seems to cap any further near-term up-move for the pair.”

“Meanwhile on the downside, 50-day SMA near 1.4400 handle might continue to protect immediate downside. Weakness below this immediate support seems to get extended till 100-day SMA support near 1.4350 region, which if broken decisively would confirm the bearish double-top chart pattern and increase the pair vulnerability to continue drifting lower in the near-term.”