- 53% of all pending orders are to acquire the Pound
- 60% of traders are long the Sterling
- Immediate resistance is at 1.2498
- The closest support is at 1.2478
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Upcoming Events: US Existing Home Sales, US Crude Oil Inventories, US HPI
British inflation surpassed the Bank of England's target of 2% last month, official figures released on Tuesday showed. The Office for National Statistics reported that consumer prices advanced 2.3% in February, following the preceding month's 1.8% increase and surpassing analysts' expectations for a 2.1% climb. Soaring inflation and the weak British Pound may force the Central bank to raise interest rates in the upcoming months. Last week, Kristin Forbes, an external member of the BoE's MPC, was the only one to vote for a rate hike at the March policy meeting. However, other members signaled they could step on the path of rate increases anytime soon if consumer prices continue rising and the economy maintains a strong foothold. Back in February, the annual rate of inflation in the UK rose above the BoE's target for the first time in more than three years, but the Governor Mark Carney claimed that it was important not to overreact to just one data point.
Meanwhile, the core annual inflation rate came in at 2.0% in February, compared to January's 1.6% gain, while analysts anticipated an increase of 1.7%. The rise in both headline and core inflation was driven by the weak Pound, which also provided significant support to British manufacturers, making them more competitive in overseas markets.
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No significant data due
Today traders can focus on the US Existing Home Sales and the Housing Price Index. The Existing Home Sales and the HPI provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. Ultimately, no significant developments are to occur due to fundamental data releases by the end of the week, the most impact is likely to be from politics or officials' speeches.
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GBP/USD sets eye on 1.25
The strong UK inflation data yesterday helped the British currency to strengthen further against the US Dollar, ultimately causing the nine-month down-trend to be pierced. Trade even managed to close above the monthly pivot point, but that does not necessarily mean that support will be sufficient for another leg up. In case bulls retain the upper hand, the pair could easily overcome the 1.25 major level, with the main target shifting to 1.2672, namely the 23.60% Fibo. However, technical indicators remain mixed, thus, the Cable still risks undergoing a corrective decline, but with the 1.24 mark expected to be intact.
Daily chart
© Dukascopy Bank SA
On the hourly chart the GBP/USD pair is seen trading within the borders of two trend-lines, but with the lower still not being fully confirmed. However, the Cable is expected to bounce back from the 1.25 mark and move towards the lower trend-line, where support could be found, but further downside risks persist, as there are no other significant supports close by.Hourly chart
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Traders mostly bullish
There are 60% of traders being long the Sterling today, compared to 67% on Tuesday. At the same time, 53% of all pending orders are to acquire the Pound (up from 50% yesterday).
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 is close to equilibrium, with 52% of traders now being long and the other 48% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
© Dukascopy Bank SABy the end of the next three months traders expect the Cable to fall under the 1.22 major level, as 54% of survey participants believe so. While the current price is around 1.23, the average forecast for June 22 is 1.2261. The 1.14-1.16 range is now the most popular price interval, having 14% of the votes, while on the second place are the 1.20-1.22 and the 1.30-1.32 price ranges, both with 13% of poll participants choosing them. Furthermore, the 1.16-1.18 and the 1.28-1.30 intervals were each chosen by 11% of the voters.