- The share of sell orders decreased to 57% from 60%
- 63% of traders have a positive outlook towards the British currency
- Immediate resistance is around 1.2340
- The closest support is at 1.2250
- Upcoming Events: US CB Consumer Confidence; US Richmond Manufacturing Index
New orders for US-made capital goods advanced more than expected in November due to strong demand for machinery and primary metals, suggesting some of the oil-related drag on manufacturing was starting to fade. According to the Commerce Department non-defense capital goods orders excluding aircraft, a went up 0.9% after an unrevised 0.2% gain in October. Moreover, there were increases in orders for electrical equipment, appliances and components, as well as computers and electronic products. A drop in oil prices last year, together with a surge in the dollar, pressured manufacturing. Much of the impact has been through weak business spending on equipment, which has contracted for four consecutive quarters. However, with oil prices hovering above $50 per barrel, manufacturing, which accounts for 12% of the US economy, is starting to perk up. In the meantime, the US economy soared at a faster pace last quarter than previously estimated, but the stronger gains only help bring the year's growth rate back in line with the long, sluggish expansion. According to the Commerce Department the US GDP expanded at an inflation- and seasonally adjusted annual rate of 3.5% in the third quarter.
Existing home sales in the United States rose for the third consecutive month in November, surprising markets and hitting their highest level for almost a decade. According to the National Association of Realtors, home resales advanced 0.7% to an annualized rate of 5.61 million units in the reported period, following October's downwardly revised rate of 5.57 million, surpassing analysts' expectations for a slight decline of 1.0% to a 5.52 million-unit pace and reaching the highest since February 2007. On an annual basis, sales increased 15.4% in November. According to the latest data published by Freddie Mac, the fixed 30- year mortgage rate has climbed around 60% to an average rate of 4.16% since Donald Trump's victory in the US presidential election. Moreover, mortgage rates are likely to go even higher after the Fed rose its key interest rate to 0.75% from 0.50% last week as well projected three more hikes in 2017. Separately, the Energy Information Administration announced on Wednesday a 2.3 million barrel increase in US crude oil inventories during the week ending December 16, while market analysts anticipated a decline of 2.4 million barrels, following the preceding week's 2.6 million barrel slip.
US data might move the rate
There are some notable data releases scheduled for Tuesday. The S&P/CS Composite- 20HPI is set to be out at 14:00 GMT. However, trader should keep their eyes open at 15:00 GMT, when the CB Consumer Confidence will be released together with the Richmond Manufacturing Index. Although, the consumer confidence index is of the utmost importance on Tuesday.
GBP/USD more volatile to the downside
The Sterling remained almost flat on Tuesday morning against the Greenback. However, the currency exchange rate was more volatile to the downside, as it was pressured lower by the upper trend line of a medium term descending channel pattern. The rate has been almost flat just below the 1.23 mark for the past few trading sessions. The reason for that is that the rate has support provided by the monthly S1 at 1.2251. However, the general down trend still persists, as strong as ever, as turmoil in the UK is not stopping.
Daily chart
The hourly chart reveals that the rate surged on Monday and even passed the upper trend line of the descending channel. However, it was stopped by the 100-hour SMA. Since then the rate has been slowly declining. Most recently the pair slightly rebounded against the lower Bollinger band, but that surge was stopped by the 55-hour SMA at 1.2280.
Hourly chart
Traders mostly bullish
Trader sentiment remains bullish, as 63% of open SWFX positions are long. Meanwhile, 57% of trader set up orders were to sell the Pound.
A similar situation is observed elsewhere. For example, 60% of positions open at OANDA are currently long. This is more than the share of shorts (40%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 66% of traders being long and 34% shorting 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 March 27 is around 1.25. Furthermore, the 1.16-1.18 interval is now the most popular one, having 16% of the votes.