- The share of buy orders also increased, from 32 to 58%
- Bulls take up 59% of the market
- 13% of the poll participants expect the British Pound to cost either between 1.48 and 1.50 dollars or between 1.58 and 1.60 dollars after a three-month period
- Immediate resistance lies in face of the 200-day SMA around 1.5325
- The nearest support rests around 1.5227, represented by the weekly S1
- Upcoming events today: FOMC Member Lacker Speech, US Average Hourly Earnings, US Non-Farm Employment Change, US Unemployment Rate
The British Pound suffered losses against most major peers, amid poor Services PMI data yesterday. The largest declines were registered against the Loonie (0.88%), the Yen (0.73%) and the Kiwi (0.67%), whereas the Sterling managed to advance 0.48% versus the Euro. Furthermore, the Pound remained relatively unchanged against the Swissie and the Aussie, adding 0.09% and 0.05%, respectively.
rowth in the UK services sector, the key pillar of the British economy as it accounts for around 78% of the nation's economic output, unexpectedly slowed in August. Markit's services PMI declined to 55.6 down from 57.4 in July, hitting the lowest level in more than two years. The gauge of new business in the services industry plunged to 56.2 in August, the lowest since April 2013, from 58.6 in July. The data also revealed business expectations among service companies at the lowest since February, while input-price inflation slowed for a third straight month to the weakest since January.
The recent manufacturing and construction data suggest the pace of economic growth is set to slow to 0.5% this quarter, from 0.7% in the three months through June. However, the Bank of England predicts a growth rate of 0.7% in both the second and third quarters. Meanwhile, NIESR said in its latest outlook that it expected UK GDP to slow down in the third quarter, but growth would remain 2.5% this year. The CBI revised up its outlook for the British economy to an increase of 2.6% this year, before accelerating further to 2.8% in 2016, driven primarily by rising business investments and productivity, as well as strong domestic demand.
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 Unemployment Rate, Average Hourly Earnings and Non-Farm Employment Change
No significant events from the UK side are due today, which turns all attention to the US Unemployment rate, the Average Hourly Earnings and Non-Farm Employment Change. The Payrolls, released by the US Department of Labor, presents the number of people on the payrolls of all non-agricultural business, the forecast for which stands at 220 thousand, up from 215 thousand. However, with rather poor ADP figures on Wednesday, we might see the data fail to meet expectations today. Nevertheless, the Unemployment Rate is forecasted to decrease, which is a good sign of a possible improvement in the labor market. At the same time, the Average Hourly Earnings is to be released, which is expected to remain unchanged. The Fed pays close attention to all these figures, as it is the last group of labor data before the Fed meets later this month to discuss its monetary policy; therefore, strong readings of these data should make the Fed raise interest rates in September, rather than the rumoured December.
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 attempts to break its two-week bearish trend
The British Pound declined against the US Dollar on Thursday, breaching the major level of 1.53. Although the immediate support cluster was reached, the pair managed to stabilise slightly higher at 1.5257. The 55-day SMA recently pierced the 100-day one to the downside, giving a signal to sell the Sterling, but the weekly S1 at 1.5227 might still provide sufficient support in order to turn the Cable around. If the US fundamental fail to disappoint, the GBP/USD is likely to decline to 1.52 level, also bolstered by the monthly S1 and the lower Bollinger band.
Daily chart
The Sterling keeps sliding down, unable to pierce the resistance trend-line. With the 1.53 level now pierced, the chances of the Cable edging higher are fading, unless the 1.52 major level or the June low cause the GBP/USD to rebound.
Hourly chart
Bulls keep growing stronger
Bulls are in the majority once more, taking up 59% of the market. The share of buy orders also increased, from 32 to 58%.
Other market participants also have a positive outlook towards the Sterling. For instance, 54% of OANDA's traders hold long positions, whereas among SAXO Group traders, 55% of all positions remain long.
Spreads (avg, pip) / Trading volume / Volatility
13% of the poll participants expect the British Pound to cost either between 1.48 and 1.50 dollars or between 1.58 and 1.60 dollars after a three-month period
The 1.48-1.50 and 1.58-1.60 price intervals are now the most popular choices among all of the votes, collected between August 4 and September 4. The given intervals were chosen by 13% of the poll participants each, whereas the second price range, selected by 12% of the voters, implies that the Sterling will cost between 1.50 and 1.52 dollars in three months. However, the mean forecast for December 4 is 1.5613.
The share of bullish votes has almost halved this week, compared to the previous five-day period. At the moment only 43% of them are going long on the Sterling, while the majority of Dukascopy traders expect to see GBP/USD lower by Sep 4. The average estimate is in turn placed precisely at the 1.5450 mark.
RacerX, a member of the Dukascopy Community, has a positive outlook towards the Sterling. "I believe that it will beat the Buck in the interest rate hike race", he explained. He also believes that the data from the UK suggests that inflation is going exactly towards the target and is strong enough to support a rate hike. Being on the bearish side of the barricade, aslamhammad anticipates the British Pound to decline against the Greenback, as "the price has found a resistance around 1.58 and is in a rising wedge formation." Aslamhammad also believes that the Non-Farm Employment Change data on Friday September 4 is to boost the US Dollar and therefore outperform the Sterling.