- 60% of all pending orders are to sell the Pound
- 61% of traders still рщдв long positions
- Immediate resistance is around 1.2550
- The closest support is at 1.2450
- Upcoming events: US Markit Services PMI, UK CBI Realizes Sales
Both building permits and housing starts dropped more than expected last month, suggesting that the Q4 growth rate could be possibly revised downwards. According to the US Department of Commerce, new-home construction fell 18.7%, the biggest decrease in almost two years, to a seasonally adjusted annual rate of 1.09 million units in November, while market analysts anticipated a slight deceleration to 1.23 million during the reported period. Housing starts tend to be volatile on a monthly basis. Meanwhile, the October figure was revised up to a 1.34 million-unit pace, the highest level since July 2007, from the originally reported 1.32 million. The Commerce Department also reported that building permits declined 4.7% to an annualized rate of 1.20 million units, following October's upwardly revised reading of 1.26 million, whereas economists expected them to decrease to a 1.24 million-unit pace.
Nevertheless, the National Association of Homebuilder's sentiment measure, released on Thursday, jumped to 70 points in December, the highest level in 11 years, compared to the previous month's figure of 63. December's increase was driven in large part by Donald Trump's surprise victory in the US presidential elections last month.
US Markit Services PMI is the only event today
Monday is rich with only one event that could have some impact on the Cable, namely the US Markit Services PMI. It captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the Services PMI is an important indicator of the overall economic condition in the US.
GBP/USD struggles to avoid losses
Even though the Cable managed to recover on Friday from a relatively sharp decline the day before, the pair is still expected to suffer losses today. However, the monthly PP and the 55-day SMA now form support around the 1.2450 level, namely just under today's opening price, which could result in a positive outcome as well. Technical indicators somewhat support this possibility, as they are giving mixed signals in the daily timeframe. Ultimately, a drop towards the 1.24 major level is expected, unless the Sterling manages to successfully stabilise above 1.2560 during the next couple of days.
Daily chart
With the breach of the up-trend, the Cable remains under the risk of sustaining more losses. A recovery seems doubtful, as the pair appears to be struggling to overcome the 1.25 major level. Psychological resistance here remains strong, with the Pound risking to decline below further.
Hourly chart
Traders mostly bullish
Market sentiment has not changed over the weekend, with 61% of traders still holding long positions. At the same time, 60% of all pending orders are to sell the Pound.
A similar situation is observed elsewhere. For example, 57% of positions open at OANDA are currently long. This is more than the share of shorts (43%), 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 March 19 is 1.2532. Furthermore, the 1.28-1.30 and the 1.30-1.32 intervals are now the most popular ones, having 13% of the votes each. On the second place in terms of the votes are the 1.16-1.18 (11%), 1.18-1.20 (11%), 1.24-1.26 (11%) and the 1.32-1.34 (11%) intervals, followed also by the 1.20-1.22 interval, with only 8% of the votes. Moreover, 60% all survey participants believe the Cable is to fall above 1.24.