- The share of sell orders climbed up to 57%
- Bulls take up 64% of the market
- Immediate resistance is represented by the monthly S1 at 1.4567
- The Bollinger band around 1.4480 is the nearest support
- 65% of traders reckon GBP/USD will be at 1.50 or lower in three months
- Upcoming events:UK Manufacturing Production, US JOLTS Job Openings, FOMC Member Fischer Speech, BoE Gov Carney Speech
Sentiment improved on Monday, helping the British currency to recover some losses and appreciate against most major peers. The largest gain was registered against the Swissie, namely 0.85%, followed by 0.56%, 0.49% and 0.48% gains versus the Yen, the Loonie and the Euro, respectively. Nevertheless, the Sterling suffered a 0.43% loss versus the Aussie, while remaining relatively unchanged against the Kiwi, edging only 0.02% lower.
The UK's trade deficit in goods and services shrank in November as the value of oil imports dropped. The British total trade shortfall came in at 3.2 billion pounds in the reported month, down from 3.5 billion pound trade gap in October, according to the Office for National Statistics. The deficit for the three months to November was 7.7 billion pounds, down 1.0 billion pounds from the previous quarter. In volume terms, exports of goods climbed 0.6% from October. However, that followed a drop of 2.5% in the month before, leaving them up by just 0.6% in terms of quarterly rates of change. Strength in Sterling, particularly versus the Euro, continued to weigh on exports amid sluggish global demand. Imports increased by 2.5% over the same time frame. The Confederation of British Industries that despite exports remaining the weakest spot, manufacturers' export orders had improved in the last month of 2015.
The UK's trade balance remains one of the weakest segments of the economy, with foreign trade in goods posting persistent deficits since 1998. Reducing the trade deficit so that the economy is less reliant on domestic demand is part of the government's policy to rebalance the economy.
UK Manufacturing Production and US JOLTS Job Openings
There is only one economic data release concerning the UK economy, namely the Manufacturing Production. The Manufacturing Production is released by the National Statistics measures the manufacturing output. Manufacturing Production is significant as a short term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP. A rather strong rebound in the month on month figures is today's anticipated result. Furthermore, the US JOLTS Job Openings data is due on Tuesday as well. It shows the number of job openings during the reported month, with exception of the farming industry. Even though it is released late, it might still have a significant impact, as this release is connected with the overall employment. Putting aside both data releases, one of the Fed officials and the BoE's governor are scheduled to speak today; their speeches are also likely to influence the respective currencies either positively or negatively.
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 at the beginning 2016."
GBP/USD anchored around 1.4550
The British currency failed to post significant gains on Monday, as supply at 1.4567 was solid, allowing the Cable to surge only 14 pips. The same resistance, namely the monthly S1, keeps weighing on the pair today, whereas the major level of 1.45 and the Bollinger band are providing immediate support. A stronger cluster is located around the 1.44 mark, but technical studies retain mixed signals, implying trade might remain relatively flat. On the other hand, fundamentals could provide a boost and help the Sterling recover some of the previous losses, ignoring even the second resistance.
Daily chart
The GBP/USD struggled to maintain trade above last year's low of 1.4565, despite having bounced back from the trend-line. From the technical point of view, the Cable could edge below 1.45 and retest the down-trend, unless the fundamental data turns in Sterling's favour and triggers a solid buying spree.
Hourly chart
Bulls remain strong
Bulls once again take up 64% of the market, compared to 65% on Monday. The share of sell orders added 1% point, climbing to 57%.
SAXO Group and OANDA have different perspectives towards the GBP/USD. Among SAXO Group traders, sentiment worsened, as 53% of their positions are now short (previously 52%); whereas 64% of OANDA traders have a positive outlook towards the Cable, compared to 67% on Monday.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.50 in three months
The majority of votes is still on the bearish side, as most of the survey participants (65%) believe the GBP/USD is going to cost 1.50 or less US dollars in three months. According to the survey, the most popular choice was the one implying that the Sterling will cost between 1.42 and 1.44 dollars in three months, believed by 32% of the voters. Meanwhile, the second most popular choice is divided between two intervals, namely 1.46-1.48 and 1.50-1.52, both voted for by 11% of the surveyed. At the same time, the mean forecast for Apr 12 is 1.4778.