- The share of sell orders went up from 60 to 62%
- The percentage of long positions increased from 60 to 63%
- GBP/USD breaks down-trend at 1.52
- Upcoming events: US ADP Non-Fam Employment Change, US Trade Balance, FOMC Meeting Minutes
The British services sector lost steam at the end of 2014, growing at the slowest clip in 19 months, adding to fears the UK economy is slowing. According to Markit Economics, services Purchasing Managers' Index dropped to 55.8 in December, compared with 58.6 recorded in the preceding month. That was the lowest reading since May 2013 and compared with economists expectations of 58.5. Markit said the data on services, manufacturing and construction sectors points to a slower growth rate of the UK economy in the final quarter of 2014. The economic output is projected to rise 0.5% in the three months through December, down from 0.7% in the previous three months. Therefore, the Bank of England policy makers are likely to maintain the benchmark interest rate at an all-time low 0.5% this week following their first policy meeting in 2015. The composite PMI, which includes surveys of the services, manufacturing and construction industries, also fell to the lowest level since May 2013 at 55.4, down from 57.8.
A separate report showed that Britons' demand for secured loans for house purchases fell markedly in the final quarter of 2014, while major lenders predict a slight rebound in the beginning of 2015. Despite house price record drop in December, Rightmove estimated that prices would continue to climb in 2015 by an average of 4% to 5%, spurred by a shortage of new property coming to market.
No UK news today, MPC Rate Statement tomorrow
The 7th of January is going to be quiet on the UK side before one of this month's main events, MPC Rate Statement, tomorrow. Nevertheless, it does not mean GBP/USD is going to be quiet itself, especially in the second part of the day, with the ADP NFP, Trade Balance and FOMC Meeting Minutes in the background.
GBP/USD breaks yet another down-trend
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
GBP/USD disregarded the down-trend line and closed beneath 1.52. The currency pair is now facing the demand at 1.5150, implied by the weekly S2 and monthly S3 levels. If this support also fails to halt depreciation of the Sterling, there will be no more reasons for the price not to drop to the 2013 low at 1.48. However, only weekly technicals are explicitly bearish, the daily and monthly indicators remain mixed.
Hourly chart
Bullish resistance is increasing
As the British Pound becomes cheaper, it also becomes more attractive for the bulls. As a result, the percentage of long positions increased from 60 to 63%. However, so far this tendency is not observed neither at OANDA nor at SAXO Bank, where the share of long positions stays at 58%.
At the same time, the share of sell orders is also on the rise, it has gone up from 60 to 62% within the last 24 hours, meaning it is becoming more and more difficult for the bears to push the price lower.
Spreads (avg, pip) / Trading volume / Volatility
Pound to stabilise near 1.5850 in Q1
Concerning the present week, the sentiment among the FX Community members experienced some changes, but the vast majority of all votes are still negative on the GBP/USD currency pair, namely 58% of them. The average prediction for Friday of this week is located around the 1.540 major level. According to one of the bears, rokasltu, GBP/USD "will go downside along with EUR/USD. During this week it might diminish by 150-200 pips".