- The share of sell orders edged up from 49 to 54%
- 62% of traders being long the GBP
- Immediate resistance is around 1.2680
- The closest support is at 1.2500
- Upcoming Events: US Core PCE Price Index, US Personal Spending and Income, US Pending Home Sales
US economic growth slowed markedly in the last quarter of 2016 amid lower shipments of soybeans that bolstered exports. The Commerce Department reported the economy grew at an annualized pace of 1.9% in the three month period to December, after expanding 3.5% in the Q3. Market analysts expected the economy to grow at a 2.2% rate in the Q4. For all of 2016, growth was 1.6%, the weakest since 2011. Low oil prices and the strong US Dollar put downward pressure on the economy last year. In the Q4, exports posted a 4.3% decline, the largest since the Q1 of 2015, compared to a 10% surge in the prior quarter. Weak exports contributed most to the fourth-quarter drop, offsetting strong consumer spending and business investment. The Commerce Department reported also that orders for durable goods dropped 0.4% month-over-month in December, missing expectations for a 2.7% increase.
Meanwhile, November's fall was revised up to 4.5% from 4.6%. The December decline was mainly driven by low orders for defense capital goods, which fell 33.4%, the largest monthly drop since May 2014. Excluding automobiles and transportation equipment, orders for core durable goods climbed 0.5%, in line with analysts' forecasts, whereas the previous month's gain of 0.5% was revised up to 0.6%.
Attention turns to US fundamentals
Monday brings several events from the US side, which could potentially influence the GBP/USD pair's performance during the day. First of all, the US Core PCE Price Index, which is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products such as food and energy in order to capture an accurate calculation of the expenditure. It is a significant indicator o inflation. Second, the Personal Income, as it measures the total income received by individuals, from all sources, including wages and salaries, interest, dividends, rent, workers' compensation, proprietors' earnings, and transfer payments. This figure can provide insight on the US employment situation. As for the Personal Spending, it measure purchases of goods and services by households and by nonprofit institutions that serve households from private business. Finally, the US Pending Home Sales. They are a leading indicator of trends of the housing market in the US. They capture residential housing contract activity of existing single-family homes. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD.
GBP/USD struggles to climb over 1.26
As was anticipated, the demand cluster around 1.2515 limited downside volatility on Friday, also causing the GBP/USD pair to close at 1.2550, namely a 44-pip loss. However, the Cable opened with a small bullish gap today, which resulted in Friday's losses getting erased. Bears, on the other hand, are refusing to give in, as they continue pushing the Sterling lower. The support area around 1.2515 remains the closest one, where the exchange rate is expected to encounter an obstacle on its journey to the bottom. Meanwhile, technical indicators suggest the Cable could still erase its intraday losses and end the day in the green zone above the 1.26 mark.
Daily chart
Upon breaking through the up-trend, the Cable entered a short consolidation phase, having remained basically in limbo through Friday. The 1.26 mark appears to be providing psychological resistance, preventing the pair from edging higher. In case a slip below 1.25 occurs, the 200-hour SMA is likely to keep the Pound elevated and, perhaps, provide some bullish momentum.
Hourly chart
Traders mostly bullish
Bullish market sentiment remains unchanged, with 62% of traders being long the GBP. The share of sell orders edged up from 49 to 54%.
A slightly less optimistic situation is observed elsewhere. For example, 57% of positions open at OANDA are currently long. This is more than the share of shorts (43%), barely sufficient for the sentiment to be called bullish. However, sentiment at Saxo Bank turned bullish once again, with 55% of traders being long and 45% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
By the end of the next three months traders expect the Cable to fall under the 1.22 major level, as 50% of survey participants believe so. While the current price is around 1.25, the average forecast for April 30 is 1.2292. However, the 1.14-1.16 interval is now the most popular one, having 17% of the votes, while on the second place is the 1.20-1.22 price range, with 14% of poll participants choosing it. Furthermore, the 1.30-1.32 interval was chosen by 11% of the voters.