- The share of the sell orders surged from 51 to 60%
- The sentiment is moderately bullish (58/42)
- GBP/USD is approaching the apex of the falling wedge pattern
- Upcoming events: UK Manufacturing PMI, US ISM Manufacturing PMI, EZ Manufacturing PMI
Previously we reported that Britain's house prices continued to ease in December amid signs of the housing market cooling from the prior record levels, according to Nationwide Building Society. Across the UK, property prices rose 7.2% on annual basis in December to 188,559 pounds on average, edging slightly lower than a historic high of 189,388 pounds recorded in November. This was the fourth straight month of slower annual house price inflation. When measured on a monthly basis, average asking prices of properties decelerated to an increase by 0.2%, compared with 0.3% measured in the previous month and in line with estimates. Nationwide expects the housing market to regain momentum next year, if the UK economy continues to grow as expected. London was named as the UK's "top performer" for price growth in 2014, with prices soaring 17.8% reaching 406,730 pounds.
Rightmove reported similar price movement for December, when average price of property in the country dropped by a record 3.3%, which slowed the annual price growth to a rise of 7%, down from 8.5% in the previous month. Despite the monthly record drop, Rightmove projected that house prices would continue to increase in 2015 by an average of 4% to 5%, driven by a shortage of new property in the market, and increased buyer sentiment amid a continuing low interest rate environment.
It's all about the manufacturing
All of today's main events will concern the production levels in the respective economic regions. Growth of the secondary sector in the Euro zone is expected to remain constant. Meanwhile, the analysts are more optimistic regarding the situation in the United Kingdom, where the pace is expected to increase. At the same time, the Institute for Supply Management in the United States is likely to show a lower figure for December than for November. However, it is noteworthy that among the last four reports only one was a negative surprise.
GBP/USD tests key resistance at 1.56
Simon Smith, Chief Economist at FXPro, advises not overestiment bullish potential of the US Dollar. According to him, "we will see Dollar strength through the year, but it's going to be a very difficult year in terms of trends".
Jean-Francois Owczarczak, the director of Fingraphs.com, says "the Cable has been correcting strongly", and notes that "it's not an impulsive move yet, but could become such if it [GBP/USD] were to move below 1.55. According to him, there's an important support we're approaching. If it is violated, it could "open more potential to the downside".
Daily chart
We should not be lulled by the recently demonstrated calm behaviour of the Cable. Once either the resistance at 1.56 or the support at 1.54 is breached, the pair will escape the boundaries of the falling wedge and as a result, the volatility should greatly increase. The situation is complicated by conflicting signals—while the indicators are mostly bearish, the pattern itself implies a turn-around.
Hourly chart
Sentiment remains bullish, but more people plan to sell the Sterling
At the moment the relative gap between the amount of bullish and bearish SWFX market participants is exactly the same as on Wednesday — 16 percentage points. The same moderate bullish attitude towards the pair is reported by other major liquidity providers. Both at OANDA and SAXO Bank 57% of open positions are long.
Concerning the orders, the share of the sell ones surged from 51 to 60%, as GBP/USD has just met the massive resistance zone (1.56) and thus could soon start moving towards the support (1.55).
Spreads (avg, pip) / Trading volume / Volatility
Pound to stabilise near 1.5850 in Q1
A separate survey, which collects the views of the most active FX Community members, reveals presence of a negative bias towards the British Pound this week. Almost a fourth of all participants expects GBP/USD to keep falling down to the 1.553/45 interval. However, the second most popular range was 1.560/53 chosen by 21% of traders.