- There is still no real difference between the buy (46%) and sell (54%) orders
- Percentage of longs fell from 65 to 63%
- Today we are likely to see a downward correction
- GBP/USD might stabilise near 1.4360
- 64% of traders reckon GBP/USD will be at 1.48 or lower in three months
- Upcoming events: US GDP, Chicago PMI
Although the fundamentals were only in line with the forecasts, this did not prevent the British Pound from outperforming all its major peers, also against the background of the BoE tilting more towards the dovish side. The currency appreciated from 0.08% against the Australian Dollar to 1.02% against the Japanese Yen.
The UK economy gathered a little steam at the end of last year, thanks to a support of the services industry, while production and construction continued to drag the growth down. Britain's gross domestic product increased 0.5% in the December quarter from the preceding three-month period, when it rose 0.4%, according to the Office for National Statistics. On an annual basis, the UK economy expanded 1.9% in the final quarter of 2015 from a year earlier, compared with 2.1% in the third quarter and marking the smallest gain since early 2013. Services were again the main driver for growth. Accounting for 78.6% of Britain's economic output, the sector expanded 0.7% on the quarter and climbed 0.2% between October and November. The biggest contribution to growth in this sector came from business services and finance, which added to the output with 0.9 percentage points. At the same time, industrial production dropped 0.2%, with manufacturing unchanged and utilities and mines cutting output. Construction output declined 0.1%. Overall, the UK growth slowed to 2.2% in 2015 from 2.9% in 2014, the ONS added. The International Monetary Fund estimates that it will expand 2.2% this year.
While economic output has risen for 12 consecutive quarters and unemployment is at its lowest level for a decade, the Bank of England is focusing on global headwinds.
US GDP growth to cool down from previous quarter
Today, there are no scheduled releases on the UK economy. Nevertheless, the US GDP number is likely to compensate for this. According to the latest estimates, world's largest economy expanded 0.8% during the last three months of 2015. More on the UK economy will be available on Monday, as we will get to know dynamics in the manufacturing sector that managed to disappoint already two months in a row.
GBP/USD to bounce off of 1.44
The Cable soared from 1.4230 yesterday and even punched through the resistance line at 1.4360, which was considered to be capable of stopping near-term rallies. Today, however, we are likely to see a downward correction, as the price has just hit not only a trend-line that connects Jan 18 and Jan 28 highs (better observed in the hourly chart), but also monthly S2 and 20-day SMA. GBP/USD might stabilise near 1.4360, but it also would not be surprising for the Sterling to descend down to 1.43 dollars.
Daily chart
In the hourly chart the Sterling is forming a rising wedge. And while for the next several days the bullish momentum is likely to stay, in the longer-term the selling pressure is expected to return with new force.
Hourly chart
Bullish sentiment weakens
A small part of traders decided to square off bullish positions—the percentage of longs fell from 65 to 63%. Meanwhile, there is still no real difference between the buy (46%) and sell (54%) orders.
Most of the OANDA clients are also bullish - 64% of them are currently holding long positions. At the same time, the bulls at SAXO Bank lost the majority, and now they take up 49% of the market (54% yesterday).
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.50 in three months
The majority of traders (64%) believe the British currency is to cost 1.48 or less dollars after a three-month period. The most popular price interval was selected by slightly less than a quarter (24%) of the voters, namely the 1.42-1.44 one, while the second most popular choice implies the Pound is to cost between 1.48 and 1.50 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for April 27 is 1.4583.
Meanwhile, the sentiment for the Cable changed on the opposite side during past seven days. The median expectation for Friday of this week is placed around the 1.427 level.
Even though traders are close to being equally divided between bulls and bears, FX-Imcap believes the Pound is to end the week in the green zone against the US Dollar. "Last trading days have been completely bearish for the GBP/USD, as concerns over BoE Governor Carney last speech reinforced that a rate hike might not take place, at least until the end of 2nd quarter," he commented. The trader also gave his prospects towards the Cable, adding that "a psychological support might be reached at 1.39 if bears overtake the lead, however, major clusters supported by 30 day SMA at 1.468 and 55 day SMA at 1.4880 suggest that an up-trend will occur in the next trading days."
At the same time, a member of the Dukascopy Community with a negative outlook towards the GBP/USD, assumes that there will be no interest rate change both from the Fed and the BoE. "The pair is running on a downtrend and after a first slightly contra trend move I expect a down trend continuation reaching 1.412 level," Khimitau said.