- The difference between the buy (46%) and sell (54%) orders is insignificant
- 57% of open positions are long
- GBP/USD heads towards the 2013 low at 1.48
- Survey: Sterling to decline in the long run
- Upcoming events: UK Lending to Individuals, US Advance GDP, Chicago PMI, UoM Consumer Sentiment
The British Pound was among the top-performing currencies yesterday, gaining as much as 1.58% against the Swissie and 1.16% against the Australian Dollar. The Sterling lost only to the Greenback (-0.48%) because of the better US fundamentals and to the Euro (-0.77%), even though there were no explicit reasons for the demand for the single currency to rise.
According to the Nationwide, annual house price growth in the UK slumped between December and January. The growth was continuously decreasing for five months in a row, as it reached a 14-month low of 6.8% in January. The prices for houses rose slightly less than the 0.4% expectation, by 0.3%, compared to 0.2% in the preceding month, with house prices currently 2.4% above the pre-crisis high. The price growth is expected to remain at a steady level amid activity slowdown in the housing market over the last few months. The amount of mortgages approved for purchasing houses was approximately 20% less than the level in the same month in 2014. Reasons for the slowdown are obscure, as unemployment keeps sliding down and for the first time in five years the wage growth rate is outrunning the cost of living. If economic background continues to strengthen as anticipated, the housing market activity will keep improving in the upcoming months.
Meanwhile, the UK retail sale volumes declined in January, but less than the expectation of 31 points, relieving of any concerns over UK's economic situation. In January the CBI realized sales declined by 22 points to 39, compared to 61 in the preceding month. The sales index data above 0 shows higher sales volumes, while below zero indicates lower sales volumes.
Lending to Individuals in the UK; Advance GDP in the US
As there are no Japan-related events scheduled for today, the main focus in on the Bureau of Economic Analysis. is expected to reveal a 3% growth of the US economy in the previous quarter after showing 5% three months earlier. This release is going to be followed by the Chicago PMI and Consumer Sentiment figures.
GBP/USD slides to 1.5050
Simon Smith, Chief Economist at FXPro, advises not overestimate 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
The support at 1.5150, mainly represented by the monthly S3, failed to underpin the Cable amid yesterday's fundamentals and allowed the currency pair to plunge down to 1.5050, namely the weekly PP. Thus the Sterling missed an opportunity to re-test the up-trend at 1.53 in the nearest future and is therefore poised to extend the sell-off. One of the nearest targets is 1.49, followed by one of the major demand areas at 1.48 (2013 low).
Another reason to be short the Sterling is emergence of a downward-sloping channel on the hourly chart. GBP/USD has just confirmed the resistance trend-line at 1.52, and at the moment the currency pair is quickly moving toward the lower boundary of the channel at 1.4940.
Hourly chart
Traders keep disregarding price fluctuations
Depreciation of the Pound did not have a noticeable effect on the SWFX sentiment: 57% of open positions are long. At the same time, the difference between the buy (46%) and sell (54%) orders is insignificant, it is less than 10 percentage points.
The SAXO Bank clients increased their exposure to the Great Britain Pound. The percentage of long positions went from 57 to 61%. Meanwhile, the sentiment at OANDA remains neutral, with the amounts of bullish and bearish market participants being almost equal.
Spreads (avg, pip) / Trading volume / Volatility
GBP/USD to be at 1.505 in three months
The sentiment among the FX Community members towards the Cable changed insignificantly during past week. The median expectation for Friday is around the 1.505 level. The traders also do not seem to expect the pair to follow a strong trend, being that as many as 47% of respondents see GBP/USD ending the week between 1.510 and 1.495.
One of the Pound-bullish FX Community members, rokasltu, believes GBP/USD is facing a tough support at 1.50, meaning the risks are skewed to the upside. Meanwhile, khalidamassi sees a major support a little lower, at 1.4812, suggesting there is still room for the price to fall.