- The portion of the sell orders declined from 64 to 55%
- Percentage of longs fell from 59 to 57%
- GBP/USD head towards the 2013 low at 1.48
- Upcoming events: UK CPI, PPI
Despite absence of any explicitly favourable for the Sterling data yesterday, the currency fared well relative to its counterparts, advancing a whole percent against the loonie and 0.76% against the kiwi. The investors seem to continue to price in the Friday's positive surprise.
Britain's manufacturing production increased the most in seven months in November, rising 0.7% from October and exceeding a 0.3% forecast of economists. However, construction and industrial production unexpectedly dropped in November, adding to evidence the UK economy lost momentum in recent months. Industrial output slipped 0.1% in the reported month due to a sharp decline in oil and gas output, versus expectations of a 0.2% increase and compared with downwardly revised 0.3% decline a month before, the Office for National Statistics informed. The production of oil and gas plummeted sharply by 5.5%, on a monthly basis, and contributed negatively with 0.57 percentage points to the total production. Meanwhile, construction output fell 2% month-on-month, against expectations for a 1.2% rebound after October's shrinkage. Construction output was 3.6% higher from a year ago - well short of forecasts for a 6.7% growth.
The ONS also reported that the declining price of oil helped to narrow the UK's trade deficit in November to the lowest level since June 2013. The trade gap shrank to 8.8 billion pounds, as exports fell by 0.1 billion pounds, while imports dropped 1.1 billion pounds. Exports to countries within the EU fell while exports to countries outside of the EU increased, particularly to China.
Inflation to decelerate
According to the consensus in the market, the Office for National Statistics is likely to report a smaller increase in the price level in December (0.7%) than in November (1%). At the same time, the prices of goods and materials purchased by manufacturers are expected to decline by a larger percentage (-2.5%) than a month before (-1.0%).
GBP/USD erodes support at 1.5150
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".
Daily chart
For the time being the monthly S3 level acts as a support, having prevented depreciation of the Sterling yesterday. However, the bears are still considered to have an upper hand over the bulls and thus are expected to push through the demand at 1.5145. At first this should result in a re-test of the support at 1.50 (weekly S1), followed by a decline down to 1.48, namely the 2013 low. Meanwhile, the upside is to be limited by the monthly S2 at 1.53.
Hourly chart
Pound loses attractiveness
The Pound is getting less popular in the market, as evidenced by a decreasing share of long positions. During the last 24 hours their percentage has fallen from 59 to 57%. The portion of the sell orders declined as well, but from 64 to 55%.
A similar tendency is observed at other brokers, such as OANDA and SAXO Bank. In the first case the percentage of long positions went down to 54%, while in the second down to 59%.