- The number of orders to sell the Sterling slid from 71 to 56%
- Traders' sentiment remains bullish at 61%
- Immediate resistance is at 1.2559
- The closest support is around 1.2485
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Upcoming Events: US Durable and Core Durable Goods Orders, US Markit Manufacturing PMI, US Markit Services PMI
UK retail sales posted the largest drop in almost seven years in the three-month period to February amid higher fuel prices that put pressure on household budgets. Nevertheless, the Office for National Statistics reported on Thursday that British retail sales advanced 1.4% last month, following the preceding month's fall of 0.5% and surpassing analysts' expectations for a 0.4% rise. Despite a stronger-than-expected rebound, in the three months to February sales dropped 1.4%, compared to a 0.5% decline seen in the three-month period to January. That marked the biggest fall since March 2010. On an annual basis, sales were up 3.7%, whereas analysts anticipated a 2.6% increase after a 1.0% gain registered in January.
Earlier this week, the ONS reported consumer prices jumped 2.3%, the highest in more than three years, while inflation used for calculation retail sales growth advanced 2.8%, the highest since March 2012. The ONS also noted that higher inflation, mainly driven by the weak Pound, started hurting consumers' pockets. Consumer spending is closely followed by the Bank of England, as it accounts for nearly two-thirds of UK output. On Thursday, one of the largest apparel retailers in Britain Next said it was "extremely cautious" about prospects for the year ahead after it reported a 4% annual profit decline.
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US Durable Goods Orders, Markit Services and Manufacturing PMIs
Once again only significant fundamental data form the US is due, namely the Durable Goods Orders. They are a measure of the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments, they are sensitive to the US economic situation. The final figure shows the state of US production activity. However, in Core Durable Goods Orders, the transport sector is excluded in order to capture a more accurate reading. Furthermore, the Markit Manufacturing PMI is due. It captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in the US. Additionally, attention should be paid to the Services PMI, which captures business conditions in the services sector. It also dominates a large part of total GDP and is an important indicator of the overall economic condition in the US.
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GBP/USD risks falling back under 1.25
Thursday was a relatively productive day for the British Pound, as it successfully stabilised above the 1.25 mark. However, downside risks are now higher, due to this major level being a tough psychological resistance, which tends to trigger U-turns lately, despite being crossed to the upside. As a result, the Cable could be seen undergoing a bearish correction today, with the monthly PP being a solid obstacle where support might be found. A much sharper decline is also possible, in which case the 55 and the 100-day SMAs are to limit the losses circa 1.24. Nevertheless, the GBP/USD is expected to continue recovering until the 1.27 handle is reached within the next month.
Daily chart
© Dukascopy Bank SA
Even though the GBP/USD currency pair continued to trade within the borders of a rising wedge pattern yesterday, the bearish momentum sparked today could cause the pattern to be fully realised, meaning that a downside breakout might occur. In this case, the 200-hour SMA is to limit the losses, as its position coincides with the support levels on the daily chart.Hourly chart
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Traders mostly bullish
Traders' sentiment remains bullish, but now at 61% (previously 63%). The number of orders to sell the Sterling slid from 71 to 56%.
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 rise above the 1.22 major level, as 52% of survey participants believe so. While the current price is around 1.23, the average forecast for June 24 is 1.2289. The 1.14-1.16 range is now the most popular price interval, having 15% of the votes, while on the second place is the 1.30-1.32 price range, with 13% of poll participants choosing it. Furthermore, the 1.16-1.18 and the 1.28-1.30 intervals were both chosen by 11% of the voters.