- The share of buy orders inched up from 41 to 59%
- 58% of all open positions are now long
- The nearest resistance is located around 1.4370
- Immediate support rests circa 1.4140
- 52% of traders reckon GBP/USD will be at 1.42 or lower in three months
- Upcoming events: UK Trade Balance, UK Construction Output, UK Consumer Inflation Expectations, US Import Prices
The Sterling had another day of relatively good performance, with exception against the Swissie and the Euro. The British currency lost 1.15% versus the Euro and 0.80% against the Swiss Franc, whereas gains were seen against other major currencies. The Pound gained the most against the Loonie and the Aussie, adding 1.18% and 0.87%, respectively, while against the third commodity currency the Sterling surged only 0.23%. The US Dollar lost 0.45% against the British Pound, amid ECB's rate decision, with demand for safe haven Yen also falling and slumping 0.31% against the GBP.
The number of Americans applying for unemployment benefits dropped more than expected last week, reaching the lowest level since October, signalling sustained improvement in the labour market. Jobless claims are being scrutinized for signs of labour market weakness following a recent massive stock market sell-off that resulted in a tightening in financial market conditions amid faltering global growth and concerns the world's number one economy was heading into recession. Initial claims for unemployment benefits dropped 18,000 to a seasonally adjusted 259,000 for the week ended March 5, the lowest level since mid-October, according to the Labor Department. Claims have now been below the 300,000 threshold, which is associated with healthy labour market conditions, for a year, the longest such stretch since the early 1970s. The four-week moving average of claims, considered a better measure of labour market developments as it strips out week-to-week volatility, declined 2,500 to 267,500 last week, the lowest level since late October.
So far, the labour market remains on strong footing, with nonfarm payrolls surging by 242,000 jobs in February and the unemployment rate holding at an eight-year low of 4.9%.
UK Goods Trade Balance and US Import Price Index
From the UK side the Goods Trade Balance figures are due today. The Trade Balance is released by the National Statistics and is a balance between exports and imports of goods. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP. If a steady demand in exchange for UK exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the GBP. Concerning the US, the only relevant event to have an impact is the Import Price Index. The Import Price Index is released by the US Department of Labor, which 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.
GBP/USD in tight range between 1.42 and 1.43
Yesterday's ECB's rate decision had an impact on other currency pairs, such as the GBP/USD. The Cable recovered from its intraday low and ended the day with a 66-pip rally, closing near the 1.43 major level. The Sterling appears to be consolidating against the US Dollar this week, with the 1.42 psychological barrier supporting the pair from the downside, also bolstered by the 20-day SMA, the monthly and the weekly PPs, while the upper boundary is represented by the 1.43 mark. Consequently, the bearish momentum should prevail today, although a surge towards the immediate resistance, namely the 55-day SMA and the weekly R1 around 1.4370 is possible.
Daily chart
The Sterling has been appreciating against the US Dollar through all of the week and is expected to prolong its trade within the ascending channel's borders. A breach of the lower boundary is doubtful, as it is reinforced by the 200-hour SMA. As a result, the Pound is likely to eventually rebound and begin moving towards the channel's resistance line above 1.44.
Hourly chart
Three brokers - three sentiments
Bulls lost some numbers over the day, as 58% of all open positions are now long. The share of buy orders, however, inched up from 41 to 59%.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 58% of them are long, compared to 55% on Thursday. At the same time, among Saxo Bank traders short positions take up 53% of the market, while the remaining long ones – 47%.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.42 in three months
The majority of traders (52%) believe the British currency is to cost 1.42 or less dollars after a three-month period. The most popular price interval was selected by 16% of the voters, namely the 1.48-1.50 one, while the second most popular choice implies that the Pound is to cost between 1.34 and 1.36 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for June 11 is 1.4238.
During February 29 – March 4 time period the Dukascopy Community members assumed this currency pair is to increase further, since more than 64% of all votes are bullish. As predicted by traders, the GBP/USD may close around the 1.42 level this Friday.
Besim76, a trader with the positive outlook towards the Sterling, commented that the GBP/USD ended the week up 2.58% on weakness in the US dollar. "The Pound ended at 1.4228 level. The broader outlook for GBP/USD remains tilted to the downside as the BoE lags behind its US counterpart, and the pair may continue to carve a long-term series of lower highs & lows as the threat of an EU exit dampens the fundamental outlook for the UK", the trader added.
Meanwhile, Al-dcdemo expects the British currency to significantly weaken against the Greenback, as "the pullback may have ran its course". "I am expecting further downside on Brexit uncertainty and weaker economic data", he explained his outlook.