- Pending orders are equally divided between buy and sell ones
- Bulls take up 63% of the market
- The nearest resistance is located at 1.3090
- Support is at 1.2899
- 54% of traders reckon GBP/USD will be at 1.40 or lower in three months
- Upcoming events: UK Goods Trade Balance, US Average Hourly Earnings, US Nonfarm Payrolls, US Unemployment Rate
UK manufacturing and industrial production data came in ahead of expectations for May, with both figures a big beat on the forecasts of economists. Manufacturing production decreased 0.5% on a monthly basis in May, down from April when it rebounded 2.3%, while the indicator came in at 1.7% on a yearly basis in the same month. Both readings beat the estimates of -1.2% and 0.6%, respectively. Overall industrial output fell 0.5% on a monthly basis in May, after a revised rebound of 2.1% seen in April. The reading did, however, beat the forecast of a negative 1.0%. On an annual basis, the gauge rebounded 1.4% in the fifth month of the year, while markets had bet on a 0.5% advance in the reported month. Industrial and manufacturing production show the volume of production in the UK's industrial and manufacturing sector, and the indicators have been volatile since the beginning of the year.
The data might look good, but, in general, both of them fell from a strong base in April, and that is before accounting for the potential crash as a result of the UK's vote to leave the European Union in June. Moreover, analysts expect the Brexit vote to have a profound influence on the country's economic performance not only in the months following the vote, but also in the years ahead.
UK Goods Trade Balance, US Unemployment Rate and Nonfarm Payrolls
There is only one significant economic data release to influence the UK economy today, namely the Goods Trade Balance. The Trade Balance 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. Later on the US figures are due, such as the Unemployment Rate, which is a percentage that surges from dividing the number of unemployed workers by the total civilian labor force. It represents the percentage of people actively seeking employment and willing to work. Usually, as a higher rate is seen in recessionary economies, while on the contrary, a growing economy sees its unemployment rate decreasing. Therefore, a decrease of the figure is seen as positive for the USD, while an increase is seen as negative, although by itself, the number cannot determine the markets move, as it depends on the headline reading, the Nonfarm Payrolls. The Payrolls present the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months and those reviews also tend to trigger volatility in the forex board.
GBP/USD muted ahead of US NFP data
The GBP/USD currency pair's trade was rather subdued on Thursday, with the bearish momentum ultimately prevailing. However, the immediate support in face of the weekly S2 remained intact, preventing the Pound from sustaining sharper losses for the second day, indicating that a possible rebound could occur today. A lot depends on the US fundamental data; in case it turns into Sterling's favour, the pair is expected to retest the 1.32 mark. On the other hand, the Buck could continue strengthening, leading the Pound further down towards the 1.2640, where the weekly S3 and the monthly S1 form a strong support area.
Daily chart
On the hourly chart the situation remains unchanged: in order for the falling wedge pattern to be fully established, another confirmation of the lower boundary is required. In the meantime, the Cable is expected to trade within the borders of the wedge, unless the NFP figures surprise either positively or negatively today. Since it is a falling wedge pattern, risks of upside breakout are higher, with the 200-hour SMA being the main resistance, confirming the outlook of the daily chart.
Hourly chart
Bulls remain in control
Bulls remain strong, taking up 63% of the market (previously 65%). All pending orders are equally divided between the buy and the sell ones.
Compared to Wednesday, there are slightly less bulls at OANDA - they take up 57% of the positions open with the Canada-based broker. Sentiment at Saxo Bank grew stronger, as here the number of bulls exceeds the number of bears by 20 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.40 in three months
More than half of traders (54%) believe the British currency is to cost 1.40 or less dollars after a three-month period. The most popular price intervals was selected by only 14% of the voters, namely the 1.28-1.30 one, while the second most popular choice implies that the Sterling is to cost between 1.36 and 1.38 dollars in three months, chosen by 12% of the surveyed. At the same time, the mean forecast for Oct 08 is 1.3916.