- 56% of all pending orders are to buy the British Pound
- 63% of all open positions still long
- Main resistance is the 55-day SMA around 1.4277
- The nearest supports are the 20-day SMA and the weekly PP around 1.4240
- 56% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: US CB Consumer Confidence, Fed Chair Yellen Speech, US ADP Non-Farm Employment Change, US Crude Oil Inventories
The Pound's performance at the beginning of the week was more than good, as it managed to outperform all other major currencies. The Sterling gained the most against the weakened Yen, namely 1.27%, followed by a 0.86% rally versus the US Dollar and 0.61% versus the Euro. The British currency struggled to post significant gains against the commodity currencies, mainly due to a small hike in oil prices. The Pound added 0.37%, 0.31% and 0.27% against the Aussie, the Kiwi and the Loonie, respectively.
US economic growth slowed less than expected in the fourth quarter, with somewhat strong consumer spending offsetting the attempts by businesses to lower an inventory overhang. US gross domestic product rose at a 1.4% annual rate compared with the previously reported 1% pace, according to the Commerce Department. The economic growth revision shows better consumer spending on services and reinforces the view that the domestic economy is on a stable footing and continues to grow. Consumer spending, which accounts for more than two thirds of US economic output, surged 2.4%, compared with the 2.0% rate reported last month. However, declining profits and weak business investment reflect overseas uncertainty has hit manufacturers, energy firms and financial markets. First quarter estimates are around a 1.5% rate, with the risks to growth are tilted to the downside.
Meanwhile, the PCE data came out lower than predicted, taking pressure off the Fed to resume interest rate increases. The price index for personal consumption climbed 0.1% last month. The core measure increased 1.7% over the past 12 months. In addition to that, consumer outlays edged a mere 0.1%, compared with a 0.2% expected by economists. A separate report showed the pending home sales index advanced 3.5% to 109.1 points in February, the highest since July.
US CB Consumer Confidence and the Fed Chair Yellen Speech
There are only two important events to influence the GBP/USD currency pair. First of all, the Consumer Confidence, released by the Conference Board, captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. The second event is the Fed Chair's Speech, where the US economic outlook and the monetary policy is to be commented on. As a head of the central bank, she has most influence over the nation's currency value.
GBP/USD takes another shot at 55-day SMA
With most of the US data disappointing yesterday, the Sterling was able to outperform the US Dollar and not only climb over the 1.42 level, but nearly even reach the 1.43 mark. The 55-day SMA around 1.4280 was the level to limit yesterday's upside volatility, continuing to provide solid resistance today. Although the 20-day SMA and the weekly PP form a strong support cluster just below the opening price, the pair could still retreat towards the monthly PP at 1.4141. On the other hand, the Cable might even surge towards 1.4446, namely the monthly R1, depending on the impact of Yellen's speech later today.
Daily chart
Even though the Cable appreciated on Monday, the exchange rate struggled to climb over the 200-hour SMA. The pair is now under pressure and remains subject to weakness. As a result, a drop towards the 1.4050 level is expected, where the bullish momentum is likely to be regained, as demand around this level was sufficient to cause a rebound several times.
Hourly chart
Sentiment turns bearish
Bullish traders' sentiment remains unchanged, with 63% of all open positions still long. Meanwhile, there are three percentage points less orders to buy the British Pound, namely 56% of them.
A similar but to a lesser extent attitude is observed at OANDA, where 62% of open positions are long, one percentage points less than on Monday. Meanwhile, the sentiment at Saxo Bank shifted to the bearish side, being that 56% of all open positions are now short and the remaining 44% are long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (56%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The most popular price interval was selected by 18% of the voters, namely the 1.38-1.40 one, while the second most popular choice implies that the Pound is to cost between 1.46 and 1.48 dollars in three months, chosen by 12% of the surveyed. At the same time, the mean forecast for June 29 is 1.4296.