- 54% of all pending orders are to buy the Pound
- 57% of all open positions are long
- Gains could be capped around 1.2850
- Significant support rests circa 1.2720
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Upcoming Events: US Building Permits, US Housing Starts, Michigan Consumer Sentiment Index, US Labor Market Conditions Index
British retail sales dropped more than expected last month, pointing to high inflationary pressures driven by the weak Pound. The Office for National Statistics reported on Thursday that retail sales dropped 1.2% month-over-month in May, following the preceding month's upwardly revised gain of 2.5% and falling behind analysts' expectations for 0.9% drop. May's fall suggested that the sharp rise in inflation after the country's decision to leave the European Union started to put significant pressure on households that are the main GDP contributors. On an annual basis, retail sales climbed 0.9% during the reported month, whereas analysts anticipated a rise of 1.7%. Earlier this week, Visa reported that UK consumers cut their spending for the first time in almost four years in May.
Later in the day, the Bank of England left its policy and interest rates at 0.25% but moved closer to the rate-rise trail, as three out of eight policymakers voted to raise rates, lifting the Sterling against other major currencies. However, some analysts suggested that the BoE would continue tolerating inflation above the 2% target for some time.
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US Building permits is the only relevant event
Friday is a rather quiet day, as it brings only one relevant event, namely the US Buildings Permits. The Building Permits show the number of permits for new construction projects. It implies the movement of corporate investments and tends to cause some volatility to the USD. Other data releases are also scheduled for today, but they are unlikely to have significant impact on the US Dollar, thus, on the given pair.
Read More: Fundamental Analysis
GBP/USD continues to consolidate
The British currency managed to erase all intraday losses yesterday and, thus, remain relatively unchanged against the Greenback. The rebound occurred from what appears to be the support line of a newly-forming ascending channel pattern, but additional confirmations are required to confirm if the channel is reliable. So far the exchange rate keeps gravitating towards the monthly S1, with risks skewed to the downside. Consequently, if the Cable experiences another decline today, the potential support would be the earlier-mentioned channel's support line around 1.2720. On the other hand, gains should be capped circa 1.2850, but a surge that far up today is doubtful, as there are no solid market movers expected to drive the given pair today.
Hourly chart
On the daily chart the Cable was seen once again unable to close above the monthly S1, which suggests that Friday is unlikely to be any different, especially since there are no fundamental data releases scheduled for today to help the Pound appreciate.Daily chart
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Traders remain neutral
Market sentiment remains somewhat bullish, as 57% of all open positions are still long. At the same time, there are 54% of all pending orders set to buy the British Pound.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 59% of all open positions are short and the remaining 41% are long. Meanwhile, sentiment at Saxo Bank is also bearish, with 62% of traders now being short and the other 38% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
© Dukascopy Bank SATraders believe the Cable is to rise above the 1.28 major level by the end of the next three months, as 53% of survey participants share this belief. While the current price is around 1.2750, the average forecast for September 16 is 1.2835. The 1.34-1.36 range is still the most popular price interval, having 20% of the votes, while on the second place are the 1.20-1.22 and the 1.24-1.26 intervals, with 16% of the voters choosing each of them.