- 57% all pending orders are to sell the Pound
- 64% of traders hold long positions
- Immediate resistance is at 1.2393
- The closest support is around 1.2250
- Upcoming events: UK Retail Sales, US Philadelphia Fed Manufacturing Index, US Jobless Claims, US Existing Home Sales
US housing starts dropped unexpectedly last month, whereas building permits rose more than expected, official figures revealed on Wednesday. According to the US Department of Commerce, the total number of housing starts issued fell 9.0% to a seasonally adjusted annual pace of 1.05 million in September, hitting the lowest level since March 2015, while market analysts anticipated a slight increase to 1.18 million units during the reported period. August's housing starts were revised up to a 1.15 million rate from the originally reported pace of 1.14 million starts. US single-family starts, which account for the largest segment of the market, climbed 8.1% to a 783,000 unit pace last month, the highest reading since February. The drop was mainly driven by the volatile multi-family segment, which posted a 38.0% decline to 264,000 unit pace in September.
In the meantime, building permits advanced 6.3% to a seasonally adjusted annual pace of 1.23 million in the same month, following August's upwardly revised reading of 1.15 million permits and surpassing the 1.17 million unit pace market forecast. Building activity is set to rebound in the coming months as building permit values remained strong, with single-family and multi-family permits rising 0.4% and 16.8% in September.
Another set of fundamental data is due
Once again a number of fundamental events are due that could have an impact on the Cable's performance. First of all, the UK Retail Sales, which measure the total receipts of retail stores. Monthly percent changes reflect rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core Retail Sales, however, exclude fuel. From the US side the Initial Jobless Claims are due. They are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy. Another event is the Philadelphia Fed Manufacturing Survey, it is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of the ISM Index. Finally, the US Existing Home Sales, which provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD.
GBP/USD in limbo around 1.23
The Cable remained relatively unchanged on Wednesday, unable to make its way above the 1.23 level, but with the immediate support cluster also limiting the losses. Technical studies retain mixed signals today, suggesting that the GBP/USD pair is in for another day of flat trade. However, a lot more volatility is expected today, compared to what was seen on Wednesday. Consequently, downside risks are higher, as the monthly S3 failed to keep the Sterling elevated slightly more than a week ago. The 1.22 level is seen to be the bottom floor in case of another leg down.
Daily chart
The GBP/USD pair is on the verge of forming an ascending channel pattern, which could help it recover to 1.28. However, the pattern is not yet confirmed, thus, there are risks of it just being a consolidation period, with the bearish momentum once again prevailing later on. For the time being the 200-hour SMA appears to be providing sufficient support to keep the pair afloat.
Hourly chart
Traders mostly bullish
Bullish traders' sentiment returned to its Monday's level of 64% (up from 63% yesterday). The majority of all pending orders are still to sell the Pound, namely 57% of them
A similar situation is observed elsewhere. For example, 61% of positions open at OANDA are currently long. This is more than the share of shorts (39%), 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 higher than the level where it is now. While the current price is around 1.23, the average forecast for January 20 is 1.2685. Furthermore, the 1.28-1.30 interval is now the most popular one, having 12% of the votes. On the second place in terms of the votes is the 1.32-1.34 (11%) interval, followed by the 1.16-1.18 price range with 10% of the votes. Moreover, 65% all survey participants believe the Cable is to fall under 1.30.