- The distribution between the buy and sell orders is 44 to 56%, respectively
- A dip in Sterling's value prompted an increase in the share of long positions from 55 to 58%
- GBP/USD heads towards the 2013 low at 1.48
- Upcoming events: US CPI, Industrial Production, Consumer Sentiment
The Pound was among the worst performers yesterday, gaining only against the Euro (+1.02%). The downward pressure on the European currency because the SNB's refusal to buy any more euros to support the national currency was passed on to the Sterling as well.
A minor bearish factor was the fact that house prices in the UK increased at the slowest annual rate since May 2013 at the end of 2014, as buyer demand was subdued by stricter lending rules as well as a looming national election due on May 7. According to the Royal Institution of Chartered Surveyors, monthly house price balance dropped to +11 in December compared with +13 in the preceding month. The gauge measures surveyors' assessment of whether house prices have risen or declined on a yearly basis over the previous three months. While the balance of surveyors reporting growth dropped in most parts of the country, it was most pronounced in London, where for a fourth straight quarter more surveyors reported price increases than declines. RICS said its members have suggested that the recent reforms to stamp duty, which lowered tax bills for most homebuyers, would lead to an increase in activity and prices over the coming year. Sales and prices are seen to climb by 2%- 5% in 2015 as a whole. Last week one of the biggest mortgage lenders in Britain Halifax said that house prices in the final quarter of the previous years surged 7.8% on year, down from 10.2% in July.
Britain's housing market has been slowing since mid-2014, when authorities forced banks to make a more meticulous checks on whether borrowers would still be able to afford mortgage repayments if interest rates increase sharply.
UK fundamentals quiet until Wednesday; US CPI and Consumer Sentiment
No high-impact data is expected from the UK until Wednesday, when the Office for National Statistics will release Claimant Count Change and Average Earnings Index. The same day we will get to know whether the recent economic updates have had any influence on the votes of the MPC regarding the necessity to increase the interest rates. Meanwhile, the main event of Friday is going to be the inflation figure in the United States, which is estimated to remain at -0.3%. At the same time, the consensus for the sentiment among the consumers is a positive change from the previous reading of 93.6 to 94.2.
GBP/USD retreats back to 1.5150
Simon Smith, Chief Economist at FXPro, advises not overestiment bullish potential of the US Dollar in 2015. 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".
As for the Sterling itself, Charles Purdy, CEO of Smart Currency Exchange, sees weakness in the nearest future, arguing that "the UK election will count against Sterling" in terms of "higher levels of uncertainty". According to the analyst, GBP/USD is likely to fall to 1.50 and then to 1.46 in one and three months, respectively. However, in a year he expects the exchange rate to recover to 1.48, after the BoE hikes the interest rates in the second half of 2015.
Daily chart
As it turned out, the Pound failed to extend the rally from the monthly S3 and instead negated most of the Wednesday's gains. Nonetheless, the bias in the short run is to the upside, considering a strong support at 1.5145. The first resistance that can end the recovery is at 1.5315, represented by the monthly S2 and followed by a dense supply area at 1.5444, where the monthly S1 coincides with the multi-month down-trend.
Hourly chart
Bulls regain majority
A dip in Sterling's value prompted an increase in the share of long positions held among the SWFX market participants from 55 to 58%. The distribution between the buy and sell orders is more or less the same as yesterday — 44 to 56%, respectively.
The attitude towards the Cable among the OANDA and SAXO Bank clients also experienced a slight improvement. The shares of long positions went up from 56 to 58 and 59%, accordingly.
Spreads (avg, pip) / Trading volume / Volatility
GBP/USD expected to rise by mid-April; FX Community undecided
As for the weekly forecast of the FX Community members, the largest part (23%) of participants expects the Sterling to trade between 1.53 and 1.52 by Friday. The second most popular answer was 1.52/1.51 (20.5%).
Some of the bulls, as rokasltu, argued that a confirmation of the support at 1.50 is likely to turn out positive for the Sterling. Meanwhile, geula4x sees a major resistance level at 1.55, but also notes presence of a demand area near the round number of 1.50.