- 53% of all pending orders are to sell the British currency
- 60% of traders hold long positions
- Immediate resistance is at 1.2532
- The closest support is circa 1.2470
- Upcoming Events: US Nonfarm Payrolls, US Unemployment Rate, US Average Hourly Earnings, US Services PMI, US Factory Orders
On Thursday, the Bank of England's Monetary Policy Committee voted to hold interest rates at historic lows of 0.25% and let their 60 billion-pound bond purchases end this month as scheduled. Moreover, policymakers left unchanged the Bank's corporate bond buying program. The majority of analysts suggest that the BoE's interest rates would probably remain unchanged until the middle of 2019, the projected date of Britain's exit from the EU. In addition, the Central bank revised its forecasts for 2017. Thus, the jobless rate is likely to fall from its current levels of 4.8% to 4.5%, whereas it was initially expected to climb to 5%. This could allow the BoE to keep its interest rates low for a longer period. Furthermore, the Bank revised upwards its 2017 economic growth forecast from the previously estimated 1.4% to 2.0%. Back in August, the BoE slashed its growth forecast for 2017 to 0.8% amid the post-Brexit vote uncertainty. As to inflation, the Central bank now expects inflation to hit its inflationary target of 2% and probably go even higher due to the weak Pound, which dropped around 20% against the Greenback since the referendum.
Separately, Markit/CIPS reported on Thursday its Construction PMI for Britain fell to 52.2 in January after four months in expansion. Meanwhile, analysts expected the Index to drop from November's 54.2 to 53.9.
All attention is on the US NFP data
Today all focus turns to the US employment data. The US Nonfarm Payrolls present the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those, reviews also tend to trigger volatility in the forex board. The US Unemployment Rate is also an important reading, which is a percentage that surges from dividing the number of unemployed workers by the total civilian labor force. It represents the percentage of people actively seeking employment and willing to work. Usually, a higher rate is seen in recessionary economies, while on the contrary, a growing economy sees its unemployment rate decreasing. However, by itself the number can't determine the markets move, as it depends on the headline reading – the Nonfarm Payrolls. Among secondary data some attention could be paid to the US 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 flat ahead of NFP data
Thursday ended with the Cable falling significantly below the anticipated 1.26 level. The immediate support, namely the weekly PP at 1.2532, was crossed yesterday, which is now acting as the nearest resistance. Today's GBP/USD driver will be the US NFP data, a strong reading of which is likely to cause the exchange rate to drop lower. The 1.24 level will then be the main target, as a tough demand cluster is located there, which is capable of limiting the losses. On the other hand, disappointments in US fundamentals could help the Sterling erase most of Thursday's losses, with the resistance around 1.2680 preventing the Pound from climbing further up.
Daily chart
The GBP/USD currency pair was unable to maintain trade in a bullish trend yesterday. Upon reaching the 1.27 major level bears took the upper hand, causing the Cable to approach the 1.25 mark. As a result, there are no solid signs on the hourly chart that could point to a possible recovery in the Sterling today.
Hourly chart
Traders mostly bullish
There are 60% of traders holding long positions today (previously 59%), whereas 53% of all pending orders are to sell the British currency.
A slightly less optimistic situation is observed elsewhere. For example, 55% of positions open at OANDA are currently long. This is more than the share of shorts (45%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank improved over the day, with 56% of traders now being long and the other 44% 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 1.22 major level, as 50% of survey participants believe so. While the current price is around 1.25, the average forecast for May 03 is 1.2286. However, the 1.14-1.16 interval is now the most popular one, having 18% of the votes, while on the second place is the 1.16-1.18 price range, with 12% of poll participants choosing it. Furthermore, the 1.20-1.22, 1.24-1.26 and the 1.30-1.32 intervals were each chosen by 11% of the voters.