- The number of purchase orders slid from 51 to 44%
- 57% of traders are long the Sterling
- Key demand area is at 1.2881/1.2859
- The closest resistance is around 1.3120
- Upcoming events: UK Current Account, UK Final GDP, US Core PCE Price Index, US Personal Spending and Income, Chicago PMI, US Revised UoM Consumer Sentiment
The number of Americans filing for unemployment benefits rose less than expected, official figures revealed on Thursday. According to the US Department of Labor, the number of claimants jumped 3,000 to a seasonally adjusted rate of 254,000 in the week ended September 24 after touching the lowest level since mid-July in the previous seven days. Meanwhile, market analysts anticipated an increase to 260,000 claims in the week ending September 24, following the preceding week's 251,000. Filings for US unemployment benefits remained below the 300,000 level for the 82nd 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 256,000 last week. Furthermore, so-called continuing claims dropped 46,000 to 2.062 million in the week ended September 17.
According to the final Q2 GDP print released by the Department of Commerce the US economy expanded at an inflation-adjusted 1.4% seasonally adjusted annual rate in the Q2 after growing 0.8% in the Q1. Economists expected the Q2 GDP to increase 1.3%. The US Dollar Index advanced to 95.49 from 95.42 ahead of the release.
UK GDP, US Core PCE Price Index, US Personal Spending and Income
On the last day of the week (and the month) there are not many events to have an impact on the Cable, but attention could still be paid to the UK Final GDP, US Core PCE Price Index and US Personal Spending and Income. The GDP shows the monetary value of all goods, services and structures, produced within a country in a given period of time. GDP is a gross measure of market activity, because it indicates the pace at which a country's economy is growing or decreasing. The US Core PCE Price Index 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 of inflation. At the same time, the US Personal Spending measures purchases of goods and services by households and by non-profit institutions that serve households from private business, whereas Personal income measure the total income received by individuals from all sources, including wages and salaries, interest, dividends, rent and transfer payments. This figure can provide insight on the US employment situation.
GBP/USD in tight range between 1.2950 and 1.30
On Thursday the British Pound weakened against the US Dollar, amid a better-than-expected reading of the US GDP. Basically, the GBP/USD currency pair has been consolidating since the beginning of the week, while holding above the 1.2950 level for more than two weeks. Consequently, a bearish development seems unlikely, but taking into account the fact that the Cable has been trading in a down-trend since the beginning of September, a rally beyond 1.30 would be difficult to achieve. Moreover, technical indicators keep suggesting the pair is to weaken further, but in this case the support line at 1.2932 should be the bottom floor.
Daily chart
The GBP/USD pair made an attempt to breach the descending channel to the upside, but the exchange rate quickly returned within the channel's borders afterwards. Right now the pair is retesting the resistance trend-line, which, technically, should trigger some Sterling-selling, therefore, preserving the pattern.
Hourly chart
Traders remain undecided
Today 57% of traders are long the Sterling, compared to 55% yesterday. The number of purchase orders, however, slid from 51 to 44%.
A different situation is observed elsewhere. For example, 72% of positions open at OANDA are currently long. This is more than the share of shorts (28%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 71% of traders being long and 29% 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 30 is 1.3126. Interestingly enough, however, the 1.30-1.32 interval is not the most popular one, having only 10% of the votes. Most of the votes are concentrated in 1.28-1.30 (17%) intervals. Furthermore, 52% all survey participants believe the Cable is to remain above 1.30.