- The share of buy orders inched up from 45 to 57%
- 55% of traders hold long positions
- Key demand area is at 1.2888/1.2880
- A strong resistance cluster is around 1.3140
- Upcoming events: US Markit Manufacturing PMI, US New Home Sales
The number of Americans filing for unemployment benefits fell sharply last week, official figures revealed on Thursday. According to the US Department of Labor, initial claims for jobless benefits dropped 8,000 to a seasonally adjusted rate of 252,000 in the week ended September 16, touching the lowest level since mid-July. Meanwhile, market analysts expected initial jobless claims to rise to 261,000 last week from the preceding week's 260,000. Filings for US unemployment benefits remained below the 300,000 level for the 81st consecutive week, the longest streak since 1973. The four-week moving average of initial claims, considered a better measure of labor market trends, declined 2,250 to 258,500 last week. The US Dollar Index, which measures its strength against a trade-weighted basket of six major currencies, fell 0.45% to 95.03, the lowest level since September 12, despite upbeat data.
Other data released by the National Association of Realtors (NAR) showed sales of previously owned US homes unexpectedly declined to a seasonally adjusted annual rate of 5.33 million units in August, following the previous month's 5.38 million unit pace and falling behind the 5.45 million unit rate market forecast. The drop was mainly driven by a shortage of properties for sale as it lifted home prices higher.
US Markit Manufacturing PMI is the only driver
On Friday there is only one relevant event that could have some impact on the GBP/USD pair's performance, namely the US Markit Manufacturing PMI. The Manufacturing PMI is released by Markit Economics and captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the US. Readings above 50 imply the economy is expanding, making investors understood it as a bullish for the USD, whereas a result below 50 points for an economic contraction, and weighs negatively on the currency.
GBP/USD in tight range between 1.30 and 1.31
The British Pound managed to outperform the US Dollar yesterday, but failed to maintain trade above the 1.31 mark. Overall, during this week the Cable's performance has been rather mild, with trade mainly contained between the 1.30 and 1.31 major levels. A bullish development today is unlikely, due to the exchange rate opening closer to a strong resistance, represented by the weekly and the monthly PPs around 1.3120. Consequently, the pair is now expected to make a U-turn and find its way back, closer to 1.30. Technical indicators are also in favour of this outcome, as they retain bearish signals.
Daily chart
On the hourly chart the Cable was seen putting the three-week down-trend to the test yesterday. The situation here supports the outlook of the daily chart, meaning that the pair is expected to decline, with the supply area, formed by the down-trend and the 200-hour SMA, being sufficient for the trend to be extended.
Hourly chart
Traders remain undecided
Market sentiment barely changed during the whole week. Today 55% of traders hold long positions, opposed to 52% on Thursday. The share of buy orders, on the other hand, inched up from 45 to 57%.
A different situation is observed elsewhere. For example, 67% of positions open at OANDA are currently long. This is more than the share of shorts (33%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 68% of traders being long and 32% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be more or less at the same level where it is now. While the current price is around 1.30, the average forecast for December 23 is 1.3179. Interestingly enough, however, the 1.30-1.32 interval is not the most popular one, having only 11% of the votes. Most of the votes are concentrated in 1.28-1.30 (18%) and 1.36-1.38 (12%) intervals. Furthermore, 54% all survey participants believe the Cable is to remain above 1.30.