- 59% of traders have a positive outlook towards the British Pound
- 64% of all pending orders are to sell the Sterling
- Immediate resistance is around 1.2725
- The closest support is circa 1.2650
- Upcoming events: UK Manufacturing and Industrial Productions, UK NIESR GDP Estimate, US JOLTS Job Openings, US Crude Oil Inventories
Growth in the largest sector of the British economy accelerated at the fastest pace since January last month, although managers' view of the economy's long-term prospects deteriorated significantly, a private survey revealed on Monday. The Markit/CIPS Services Purchasing Managers' Index advanced to 55.2 in November, following the preceding month's reading of 54.5, while market analysts anticipated a slight fall to 54.2 points. However, business sentiment was at its lowest since July in the reported month and the second-lowest since December 2012 amid the steep drop in the value of the British Pound and uncertainty over the outcome of the withdrawal negotiations between the UK and EU.
Despite the fall in the manufacturing growth rate reported last week by Markit, the economy is still expected to maintain the last quarter's 0.5% growth pace in the Q4. Back in November, the Bank of England revised up its 2016 Q4 economic growth forecast to 0.4% but added that annual growth would fall to 1.4% in 2017 from 2.2% in 2016, mainly driven by higher inflation. According to the Central bank, inflation will climb to 2.7% next year from 0.9% in the latest data. Nevertheless, analysts state the BoE is unlikely to raise interest rates in the near future.
UK Manufacturing and Industrial Productions are the main drivers today
There are not many events to influence the GBP/USD pair today, but some impact may be from the UK Manufacturing Production. It measures the manufacturing output and is a significant as a short-term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP. UK Industrial Production could also have some effect on the pair, as it measures output of the UK factories and mines. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector.
GBP/USD continues to trim gains
The British currency slid back under 1.27 on Tuesday, after having appreciated against the US Dollar for five consecutive sessions. The given correction could now last until the broadening rising wedge's support line around the 1.25 mark is reached. This support line is also reinforced by the monthly PP, the weekly S1, the 20 and the 55-day SMAs, making this area even harder to pierce, suggesting the pattern is to be preserved. However, the Cable is unlikely to drop so low today, as the immediate support cluster is expected if not stop the decline completely, then at least to slow it down.
Daily chart
The GBP/USD pair did pierce the rising wedge's support line yesterday, which only sparked Cable-selling. The Sterling continued to weaken today as well, with the first target now being the 200-hour SMA around 1.2570, which is the final obstacle before the up-trend just under 1.25 can be put to the test again.
Hourly chart
Traders mostly bullish
Once again 59% of traders have a positive outlook towards the British Pound, compared to 56% yesterday. Meanwhile, 64% of all pending orders are to sell the Sterling, up from 61% on Tuesday.
A similar situation is observed elsewhere. For example, 57% of positions open at OANDA are currently long. This is more than the share of shorts (43%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 58% of traders being long and 42% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be higher than the level where it is now. While the current price is around 1.24, the average forecast for March 07 is 1.2542. Furthermore, the 1.30-1.32 interval is now the most popular one, having 14% of the votes. On the second place in terms of the votes are the 1.16-1.18 (11%) and the 1.28-1.30 (11%) intervals, followed also by the 1.18-1.20, 1.22-1.24, 1.26-1.28 and 1.32-1.34 intervals, all with only 9% of the votes. Moreover, 59% all survey participants believe the Cable is to fall above 1.24.