- The portion of orders to acquire the British currency increased from 45 to 56%
- Market sentiment remains unchanged, with bears still taking up 51% of the market
- 18% of traders assume the Sterling will cost between 1.50 and 1.52 dollars in three months
- The nearest resistance is located around 1.5762, the weekly PP
- Immediate support, represented by the monthly R1, lies at 1.5703
- Upcoming events today: US Revised UoM Consumer Sentiment, BoE Governor Carney Speech
The Sterling experienced mixed performance, it appreciated against most major peers, with exception against the Loonie and the Aussie. Largest gains were detected against the Swiss Franc, 0.61%, and the Euro and the Greenback, adding 0.26% versus both of them. The Pound declined 0.20% and 0.17% against the Aussie and the Loonie, respectively, but remained relatively unchanged versus the Kiwi, gaining only 0.02%.
Even though UK retail sales remained strong in June, the volumes sold fell more than expected from the preceding month. The Confederation of British Industry said its retail sales balance dropped to +29 this month, down from +51 in May, which was the highest level in five month. The median estimate stood at +35. The decline was led by a sluggish activity in the grocery sector. On top of that, the gauge of expected sales for the month ahead dropped after reaching the highest level in more than 26 years last month. Official data last week indicated UK retail sales growth eased sharply in May following sturdy growth in the preceding month, as Britons bought fewer clothes. In its June MPC minutes the Bank of England said that some of policy makers believed higher real income, supported by very low inflation on the back of cheaper oil prices, failed to underpin spending morale and activity as much as had been estimated.
Meanwhile, on a political landscape, British Prime Minister David Cameron kicked off talks with European leaders in Brussels on the terms of the UK's EU membership. However, with the agenda of the European Council summit set to be dominated by the Greek debt crisis, time will be limited to consider Britain's proposal. Besides, the British leader is unlikely to provide a detailed list of demands during the summit. Cameron promised his voters an in-out referendum on EU membership by the end of 2017.
Paul Bednarczyk, head of research at 4CAST, is optimistic with respect to the world's largest economy over the coming months, saying that "we should be seeing some better US numbers coming through," which will lead the Cable to 1.54. Meanwhile, the analyst considers that "over the next three months Sterling will perform well on a trade-weighted basis," but GBP/USD is still likely to decline to 1.4850. In the longer-term perspective, Bednarczyk is also bearish, setting his 12-month forecast at 1.42, which will be a story of Dollar strength rather than Sterling weakness.
US Revised UoM Consumer Sentiment and BoE Governor Carney Speech
The Revised UoM Consumer Sentiment is forecasted to remain unchanged, although according to the historical data, there is a slim chance of the data failing to meet expectations. However, the main event to influence the Cable today is the Mark Carney's speech. Carney is expected to provide insight on the future monetary policy of the Bank of England, but most particularly on the Bank's interest rate policy. A hawkish speech would cause the Cable to appreciate again.Ross Walker, economist at Royal Bank of Scotland Group, suspects that GBP/USD may descend to 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross mentioned that "the main driver in many ways, as well as the main support in recent times, have been the expectations that the Bank of England will raise interest rates at some point next year, probably the beginning 2016."
GBP/USD to attempt to reclaim 1.58
The monthly R1 managed to cause the Cable to rebound on Thursday. Gains, however, were limited by the 1.5750 level, just a few pips away from the weekly PP. Nevertheless, the bullish perspective towards the Sterling remains strong, as technical indicators are giving distinctly bullish signals. The immediate resistance is likely to be breached, and the Pound might even stabilse above the 1.58 major level.
Daily chart
After piercing the 200-hour SMA to the downside, the Cable was expected to reclaim the area above it on Thursday. Several attempts were made, but were in vain, as the pair lacked the strength to edge higher. After failed attempts the GBP/USD began consolidating and is expected to continue doing so until the second half of the day when some economic event will influence the exchange rate.
Hourly chart
Bears prevailing over bulls
Market sentiment remains unchanged, with bears still taking up 51% of the market. The portion of orders to acquire the British currency, however, increased from 45 to 56%.
Although slightly weaker, but other market participants have a bearish outlook towards the Cable. The SAXO Group's clients have 73% of short positions, compared to 71% yesterday. Meanwhile the bearish market sentiment of OANDA shifted from 62 to 58%.
Spreads (avg, pip) / Trading volume / Volatility
18% of traders assume the Sterling will cost between 1.50 and 1.52 dollars in three months
The survey participants have high expectations concerning the Cable, as the majority of them, namely 61%, assume the Sterling will cost more than 1.54 dollars after three months. However, the most popular price interval now remains between 1.50 and 1.52 dollars, chosen by 18% of the surveyed, while the second place is now taken by the 1.60-1.62 price range, voted for by only 15% of the participants. According to the survey conducted between May 26 and June 26, the mean forecast for September 26 is 1.5647.
Currently, the pair is still trading in the bullish channel, while traders' forecasts divided equally. Speaking about the next week, the average expectation of the Community members went down to around 1.585.
This week aslamhammad, one of the community members, now has a bullish outlook towards the Sterling. He said that "currently the price is overbought and could move sideways, but I am expecting the price to close around 1.60 on this coming Friday, June 26." On the bearish side we have rokasltu, another Dukascopy trader. In his opinion the GBP/USD will come to levels near 1.55 mark, as interest rates for USD will be hiked.