- 54% of all pending orders are to sell the Pound
- 65% of all open positions are long
- Immediate resistance is at 1.2342
- The closest support is at 1.2251
- Upcoming Events: Chicago Purchasing Manager's Index
The US job market finished the year on solid footing as an important indicator of layoffs continued to be near historically low levels, showing a resilient labor market. According to the a Labor Department, national jobless claims declined by 10,000, to 265,000, during the previous week from a six-month high in the prior period. The data tend to fluctuate around the year-end holidays, while the trend reveals managers' reluctance to fire workers as demand remains steady. Filings have been below 300,000 for 95 straight weeks — the longest streak since 1970 and a level economists say is typical for a healthy labor market. Millions of Americans have found work in the past five years, pushing the unemployment rate below 5% and eliciting complaints among businesses about how hard it is to find skilled workers to fill open jobs.
In the meantime, the less volatile four-week average of initial claims, meanwhile, dropped by 750 to 263,000. Continuing jobless claims, in turn, advanced by 63,000 to 2.1 million in the week ended December 17. These claims, reported with a one-week delay, reflect the number of people already collecting unemployment checks.
Chicago PMI is the only relevant event
Last weekday of the year brings us only one relative event that could have some impact on the given pair's performance – the Chicago PMI. It is released by the ISM-Chicago, Inc, and captures conditions across Illinois, Indiana and Michigan. This index is an indicator of business trends and it is interrelated with the ISM manufacturing index. It is widely used to indicate the overall economic condition in the US. A result above 50 is bullish for the USD, whereas a result below 50 is seen as bearish.
GBP/USD remains on the back foot
Although the British Pound successfully posted some gains against the American Dollar on Thursday, risks remain skewed to the downside. The closest support, namely the monthly S1, is unlikely to keep the Cable afloat, as it gave in earlier this week, allowing the pair to cross the 1.2250 threshold. The next target is the 1.22 major level, which managed to provide sufficient psychological support for the time being, but, ultimately, the trend-line near the 1.21 mark is expected to eventually be put to the test. Technical studies are in favour of the negative outcome, suggesting the Sterling's attempts to reclaim the 1.23 mark will be in vain.
Daily chart
The Cable continued to appreciate ever since it touched the trend-line one week ago, but it appears to be more of a consolidation period. At the moment the 200-hour SMA was reached, which should prevent any further bullish developments, causing the pair to drop back to the trend-line eventually.
Hourly chart
Traders mostly bullish
Traders remain bullish on the Cable, with 65% of all open positions being long. Meanwhile, 54% of all pending orders are to sell the Pound.
A similar situation is observed elsewhere. For example, 64% of positions open at OANDA are currently long. This is more than the share of shorts (36%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 65% of traders being long and 35% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
By the end of the next three months traders expect the Cable to fall under the 1.26 major level, as 60% of survey participants believe so. While the current price is around 1.23, the average forecast for March 30 is 1.2473. However, the 1.18-1.20 interval is now the most popular one, having 15% of the votes, while on the second place is the 1.16-1.18 price range, with 13% of poll participants choosing each of them. Furthermore, the 1.22-1.24 and the 1.28-1.30 intervals were chosen by 12% of the voters each.