- The number of orders to acquire the British currency takes up 58%
- SWFX traders' sentiment is bullish at 65%
- The main short-term support lies around 1.3827
- Resistance is at 1.3980, namely the weekly PP and the monthly S1
- 61% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Net Lending to Individuals, UK Mortgage Approvals, US Chicago PMI, US Pending Homes Sales
The British Pound managed to outperform four out of seven of other major currencies. The Sterling gained the most against two commodity currencies, namely the Aussie and the Kiwi, adding 0.88% and 0.78%, respectively. The Pound also gained a noticeable 0.28% against the Yen. Losses, however, were registered versus the Loonie (0.77%), while the Cable dropped 0.65% lower on positive US GDP data. At the same time, the EUR/GBP and the GBP/CHF both remained relatively unchanged, dropping 0.09% and edging 0.02% lower, respectively.
The world's number one economy unexpectedly grew at a faster pace in the final quarter of 2015 than initially estimated, reflecting a higher value of business inventories. The US economy expanded at a 1% rate in the final three months of 2015, better than a previously reported 0.7% gain, according to the Commerce Department. The economy still lost a lot of momentum, though, after growing 2% in the third quarter. Nevertheless, growth is projected to re-accelerate this year as consumers enjoy the benefits of an improving job market and savings on gasoline to boost spending.
US businesses reduced inventories much less than initially estimated in the fourth quarter. The revised inventory estimate entirely accounts for the upward revision of GDP growth. The change in private inventories provided a 0.14 percentage point drag on growth, rather than the 0.45 point drag estimated a month ago. At the same time, household spending, the backbone of the US economy, rose even less, the revisions showed. Consumers bought $56.9 billion worth of goods and services at the end of the year. That is an increase of 2% in annualized terms compared to three months earlier. Moreover, imports subtract from GDP, as they fell at a 0.6% pace, compared with the initial reading of a 1.1% gain. However, exports contributed to GDP growth.
UK Net Lending to Individuals and US Pending Home Sales
Today there are several economic data releases to influence the Cable both from the UK and the US. First of all, the UK Net Lending to Individuals is released by the Bank of England, which is a monthly measure of growth rates, amounts outstanding and changes in total lending to individuals, divided into lending secured on dwellings and consumer credit. It shows a picture of whether or not consumers are willing to spend money. Secondly, from the US attention should be paid to US Pending Home Sales. The Pending Home Sales are released by the National Association of Realtors and are a leading indicator of trends of the housing market in the US It captures residential housing contract activity of existing single-family homes. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD.
GBP/USD under the risk of falling under 1.38
Strong US GDP figures caused the Cable to retreat from its daily high of 1.4045, ultimately falling to the lowest in six years. According to technical studies, the given pair is likely to undergo another sell-off, with the immediate support in face of the Bollinger band doubtfully limiting the losses. Consequently, the GBP/USD currency pair's price could fall below the 1.38 level, with the second support area located only around 1.3680. Meanwhile, the monthly S1 and the weekly PP form a rather strong resistance cluster circa 1.3980, in case bulls manage to push the Sterling higher against the Buck.
Daily chart
Upon reaching the 1.4045 level, the GBP/USD currency pair experienced a rather sharp sell-off, which put on hold the pair's recovery towards the resistance line at 1.4325. The 200-hour SMA is still a solid resistance, which can put the recovery on hold.
Hourly chart
Three brokers - three sentiments
SWFX traders' sentiment remains bullish, now at 65%, compared to 63% last Friday. At the same time, the number of orders to acquire the British currency added three percentage points, surging up to 58%.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 63% of them are long, unchanged since last Friday. At the same time, among Saxo Bank traders bulls remain in the majority: 58% of their open positions are long and the other 42% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (61%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price interval was selected by 17% of the voters, namely the 1.34-1.36 one, while the second most popular choice implies that 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 May 29 is 1.4337.