- Sell orders are once again in a majority (64%)
- 59% of positions are long and 41% are short
- GBP/USD head towards the 2013 low at 1.48
- Upcoming events: FOMC Lockhart Speech
The Sterling was one of the top performers last Friday, gaining 0.75% against the loonied and 0.45% against the greenback on the back of the positive news on the UK production and trade.
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.
Quiet Monday
Concerning the UK economy, the first day of this week is going to be completely eventless. However, tomorrow Office for National Statistics will give a reason for the volatility to elevate, namely release the yearly change in CPI.
GBP/USD makes a U-turn ahead of 1.50
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
Although GBP/USD seems to have found support ahead of 1.50, the risks are still considered to be skewed to the downside. For lack of the strong support nearby, the Cable is likely to keep moving south until it hits the 2013 low. However, should the bearish pressure persist and 1.48 give in, the Sterling will then have a good opportunity to visit the 2010 low near 1.42. Meanwhile, the technical indicators are mixed.
Hourly chart
Sell orders regain majority
The SWFX market traders are unwilling to either increase or decrease their exposure towards the Pound. Like last week, 59% of positions are long and 41% are short. Meanwhile, at OANDA the skew in favour of the bulls is slightly less pronounced - 56 to 44%, and at SAXO Bank slightly more pronounced - 60 to 40%.
As for the orders, the sell ones are once again in a majority with 64%, indicating the supply may grow and thereby negatively affect the value of the Pound.