- 51% of all pending orders are to acquire the British currency
- 55% of traders are long the Pound
- Immediate resistance is at 1.2502
- The closest support is around 1.2430
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Upcoming events: US President Trump's Speech, US Import Prices, US Federal Budget Balance, US PPI and Core PPI, US Initial Jobless Claims, US Preliminary Consumer Sentiment
British inflation remained unchanged in March compared to the prior month due to this year's later Easter and a slight fall in oil prices. The Office for National Statistics reported on Tuesday consumer prices rose 2.3% on an annualised basis last month, while market analysts anticipated a 2.2% increase. The sharp fall in the value of the British Pound paired with the recent rebound in oil prices boosted inflation across Britain. Furthermore, a combination of subdued wage growth and surging inflation started putting significant pressure on households' pockets, raising concerns over growth prospects as consumer spending accounts for about 60% of the British economy. Tuesday's data also showed that food prices climbed 1.2% on an annualised basis in March, the largest gain since 2014.
However, the Bank of England said at its latest monetary policy meeting that there was no rush to raise interest rates and it was prepared to tolerate inflation above the 2% target. The main driver behind March's unchanged reading was a drop in airfares, which, in turn, was triggered by the later timing of this year's Easter holidays. Analysts suggest that consumer prices will continue surging until inflation hits 3% due to the weak Sterling and higher oil prices.
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US Import Price Index and the Federal Budget Balance
Among events worth paying attention to today are the US Import Price Index and the US Monthly Budget Statement. The US Import Price Index informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise. As for the Monthly Budget Statement, it summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD. The US President Donald Trump is also scheduled to speak today, whose words could have a great impact on the US Dollar.
Read More: Fundamental Analysis
GBP/USD reluctant to leave bearish trend
A set of upbeat inflation data on Tuesday provided the Sterling with a sufficient boost to once again stabilise above the cluster of important levels circa 1.2330. However, the rally was not strong enough for the Cable to climb over the 1.25 mark, suggesting that another U-turn today is possible, despite technical indicators giving different signals. A surge of more than 50 pips would cause the six-month down-trend to be breached, with focus then shifting to the second strong resistance, namely the cluster around 1.2630. However, should the GBP/USD pair continue to consolidate, the 1.24 major level would become open for exposure once again.
Daily chart
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Tuesday ended with the down-trend on the hourly chart getting pierced, along with the 200-hour SMA. However, this breakout does not imply that more bullish momentum is to follow, as the bearish trend-line on the daily chart remains intact. The Cable is expected to meet resistance near last week's high of 1.2554- Hourly chart
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Traders mostly bullish
There are 55% of traders being long the Pound today (previously 57%), whereas 51% of all pending orders are to acquire the British currency.
A less optimistic situation is observed elsewhere. The sentiment at OANDA turned somewhat bearish today, but there are not significantly more bears than bulls, namely 53% of all open positions are short and the remaining 47% are long. Meanwhile, sentiment at Saxo Bank worsened over the day, with 54% of traders now being long and the other 46% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
© Dukascopy Bank SABy the end of the next three months traders believe the Cable is to rise above the 1.22 major level, as 55% of survey participants believe so. While the current price is around 1.24, the average forecast for July 12 is 1.2424. The 1.18-1.20 range is now the most popular price interval, having 18% of the votes, while on the second place are the 1.20-1.22 and the 1.30-1.32 price ranges, with 13% of poll participants choosing each of them. Furthermore, the 1.24-1.26 and the 1.26-1.28 intervals were both selected by 11% of the voters.