- The share of sell orders slid from 61 to 56%
- 68% of traders are long the Sterling
- Immediate resistance is around 1.2285
- The closest support is at 1.2183
- Upcoming events: UK Manufacturing PMI, US Manufacturing PMI, US Construction Spending
Consumer spending in the United States increased more than expected last month amid higher purchases of motor vehicles and higher inflation, official data revealed on Monday. According to the US Department of Commerce, consumer spending jumped 0.5% in September, following the preceding month's downwardly revised fall of 0.1% and meeting analysts' expectations. When adjusting for inflation, Monday's report showed consumer spending advanced 0.3% in the reported month after dropping 0.2% in August. In the meantime, the PCE Price Index grew 0.2% in September, the same pace as in the previous month. Year-over-year, the Index climbed 1.2%, the largest annual gain since November 2014, up from August's gain of 1.0%. Furthermore, the so-called core PCE Index increased 0.1% in the same month, compared to the 0.2% rise registered in August. On an annual basis, the core PCE Index advanced 1.7%, the similar increase in the preceding month.
The Fed is not expected to raise interest rates at that meeting ahead of the presidential election; however, analysts widely anticipate a rate hike in December. Back in September, the Fed held rates steady for the sixth straight meeting.
UK and US Manufacturing PMIs are the main events today
The most important events concerning the Cable today are the Manufacturing PMIs. The UK Manufacturing PMI is released by both the Chartered Institute of Purchasing & Supply and the Markit Economics. It 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 UK. The US Manufacturing PMI is also released by the Markit Economics, as well as the Institute for Supply Management. Another important event from the US is the Construction Spending. It is an indicator that measures the total amount of spending in the US on all types of construction. The residential construction component is useful for predicting future national new home sales and mortgage origination volume.
GBP/USD to move back to 1.22
The British Pound strengthened against the American Dollar on Monday, reaching its trading range's upper border, namely the 1.2250 level. Consequently, a decline is likely to take place today, bouncing back from the 1.2250 mark, since the GBP/USD pair appears to be gravitating towards the 1.22 level. The weekly pivot point still acts as the nearest support, which is to limit intraday losses, but with the 1.2150 being the bottom floor in case of a more bearish outcome. Technical studies are somewhat confirming the outlook, as they keep giving mixed signals in all timeframes, implying that the consolidation trend is to be maintained.
Daily chart
According to the hourly chart the GBP/USD pair remains in a tight range between 1.2115 and 1.2330, a much wider range than the one of the daily chart. As a result, the Cable could appreciate much further than was first expected, but the bearish momentum is still expected to kick in eventually.
Hourly chart
Traders mostly bullish
There are 68% of traders being long the Sterling today (previously 69%), whereas the share of sell orders slid from 61 to 56%.
A similar situation is observed elsewhere. For example, 62% of positions open at OANDA are currently long. This is more than the share of shorts (38%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 61% of traders being long and 39% 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 1.22, the average forecast for February 01 is 1.2346. Furthermore, the 1.18-1.20 interval is now the most popular one, having 17% of the votes. On the second place in terms of the votes are the 1.16-1.18 (11%) and the 1.20-1.22 (11%) intervals, followed also by the 1.32-1.34 with only 8% of the votes. Moreover, 78% all survey participants believe the Cable is to fall under 1.30.