- 61% of orders are to buy the Pound
- Market sentiment is at a perfect equilibrium
- Immediate resistance is around 1.2970
- The closest support is at 1.2745
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Upcoming events: UK Preliminary GDP, US Advance GDP, US Employment Cost Index, Chicago PMI, Michigan Consumer Sentiment
Orders for US-manufactured goods rose less than experts estimated in March, official figures revealed on Thursday. The US Department of Commerce reported that orders for durable goods in March soared only 0.7%, following the previous month's increase of 1.8%. Excluding transportation items, orders for core durable goods plunged 0.2%, while analysts anticipated 0.4% growth. This negative figure represented the first decline since June 2016. The main cause of March's drop was associated with weaker demand for automobiles, fabricated metal products and machinery. Namely, the number of orders for motor vehicles tumbled 0.8%, the slowest rate of growth in the last 25 months. At the same time, orders for fabricated metal products slipped 0.8%, whereas machinery orders fell 0.2%. In contrast, bookings in the civil aircraft sector jumped 7%.
Furthermore, the number of orders for defence equipment advanced 12%. According to analysts, the slowdown at the end of the Q1 was mainly driven by the strong US Dollar, struggles in the energy sector and the weather-related factors. Nevertheless, they believe that businesses are going to increase their capital expenditures in the near future amid the US President Donald Trump's announced tax reform.
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UK and US GDP + US ECI
Today, both from the US and the UK sides the GDP data are due. The GDP shows the monetary value of all the goods, services and structures produced within a country in a given period of time. It is a gross measure of market activity, because it indicates the pace at which a country's economy is growing or decreasing. In addition to that, the US Employment Cost Index is also to be released today. It is a quarterly measure of the change in the price of labor, defined as a compensation per employees hour worked. Closely watched by many economists, the ECI is an indicator of cost pressures within companies that could lead to price inflation for finished goods and services. The index measure changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. Some attention could also be paid to the Chicago PMI, as it captures business conditions across Illinois, Indiana and Michigan. This index is an indicator of business trends and it is interrelated with the ISM manufacturing index. It is widely used to indicate the overall economic condition in the US.
Read More: Fundamental Analysis
GBP/USD: risks skewed to the downside
Downbeat US fundamental data caused the Cable to appreciate again and break out from its consolidation trend yesterday. Despite the breakout, the GBP/USD currency pair is still unlikely to keep posting gains, due to the monthly R2, the weekly R1 and the upper Bollinger band forming resistance just 50 pip from today's opening price. Furthermore, the still not fully confirmed broadening rising wedge's resistance line passes through that area, thus, providing additional resistance. Meanwhile, the nearest support lies only around 1.2745, but a drop that low is unlikely to occur, with the 1.28 mark expected to be the lowest possible level.
Daily chart
The situation on the hourly chart remains unchanged, being that the Cable still risks sliding back down, thus, retest the three-week up-trend. However, the post-channel rally still appears to have not lost its steam, thus, another surge is also possible.Hourly chart
Read More: Technical Analysis
Traders are equally divided
Market sentiment once again reached a perfect equilibrium, but the portion of orders to acquire the Sterling edged up from 57 to 61%.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 58% of all open positions are short and the remaining 42% are long. Meanwhile, sentiment at Saxo Bank worsened again over the day, with 57% of traders now being short and the other 43% being long the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
© Dukascopy Bank SABy the end of the next three months traders believe the Cable is to rise above the 1.26 major level, as 63% of survey participants believe so. While the current price is around 1.29, the average forecast for July 28 is 1.2765. The 1.30-1.32 range is now the most popular price interval, having 18% of the votes, while on the second place is the 1.28-1.30 one, with 15% of poll participants choosing it. Furthermore, the 1.32-1.34 and the 1.34-1.36 intervals were both selected by 13% of the voters.