- 41% of all pending orders are to sell the Pound
- 63% of traders have a positive outlook towards the British currency
- Immediate resistance is at 1.2407
- The closest support is at 1.2380
- Upcoming events: UK Goods Trade Balance, US Crude Oil Inventories, MPC Member Haldane Speech
British manufacturing activity jumped unexpectedly in September amid rising inflationary pressures, official figures revealed on Tuesday. According to the Office for National Statistics, factory output rose 0.6% month-over-month in September, the biggest increase since April, up from the preceding month's gain of 0.2%, while market analysts anticipate an acceleration of 0.5%. On annual basis, manufacturing output grew 0.2%, surpassing forecasts for a 0.5% fall.
Nevertheless, the country's manufacturing output dropped 0.9% in the Q3. On the negative side, industrial production declined 0.4% in September, unchanged from the previous month, whereas economists expected to see an increase of 0.1% in the reported month. Year-over-year, industrial output advanced 0.3%, although analysts predicted a rise of 0.8%. On a quarterly basis, UK industrial production declined 0.5%. The September fall in industrial output was mainly driven by a decrease in demand for heating amid warmer-than-usual weather and planned maintenance in oil and gas fields of the North Sea. Economic activity in the manufacturing sector is expected to expand markedly in the upcoming months due to the weak British Pound, which fell sharply after the country's decision to leave the European Union.
UK Goods Trade Balance is the only relevant event
One of the most important events today are the UK Goods Trade Balance. It is a balance between exports and imports of goods. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP. If a steady demand in exchange for UK exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the GBP. From the US side, however, there are no important events due, as the US election results had its impact.
GBP/USD soars to 1.2550 amid US election results
On Tuesday the Cable remained within a tight range, namely between the monthly and the weekly PPs. With the victory of Donald Trump in the US election, the Greenback weakened slightly, allowing the Sterling to reach the 1.2550 level earlier today. However, the pair was unable to climb higher and retreated almost immediately, with the Pound sliding back below 1.25. Technical studies remain in favour of a positive outcome today, but it is uncertain whether the Sterling will able to maintain trade in the green zone today. The monthly PP is providing strong support, which could help the pair retain its position above 1.24.
Daily chart
Since the beginning of the week the GBP/USD pair was mildly sliding down, until receiving a strong boost earlier today. The 200-hour SMA also kept rising, providing support, thus, even if the exchange rate retreats, a significant drop below 1.24 is unlikely.
Hourly chart
Traders mostly bullish
There are 63% of traders with a positive outlook towards the British currency today (previously 62%). Concerning the pending orders, 41% of them are to sell the Pound, compared to 39% on Tuesday.
A similar situation is observed elsewhere. For example, 65% of positions open at OANDA are currently long. This is more than the share of shorts (35%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 58% of traders being long and 42% 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 1.24, the average forecast for November 09 is 1.2150. Furthermore, the 1.18-1.20 interval is now the most popular one, having 20% of the votes. On the second place in terms of the votes is the 1.16-1.18 (16%) interval, followed also by the 1.20-1.22 with only 11% of the votes. Moreover, 75% all survey participants believe the Cable is to fall under 1.26.