GBP/USD on route to erasing last week's losses

Consumer prices in the United States advanced last month but less than analysts expected. The Labour Department reported on Friday that its CPI rose 0.2% in April, following the preceding month's drop of 0.3% but missing expectations for a 0.3% gain. Furthermore, the so-called core inflation rate climbed 0.1% last month, compared to the previous month's fall of 0.1%, whereas analysts anticipated an increase of 0.2%. However, both figures pointed to a tightening labour market and solid inflation growth, suggesting that the Federal Reserve will likely raise interest rates at its June meeting. April's inflation rebound was mainly attributable to the oil price rebound. Other data released by the Commerce Department showed retail sales rose 0.4% in April, following the prior month's upwardly revised gain of 0.1% and falling behind forecasts for a 0.6% increase.

Meanwhile, core retail sales, which exclude volatile items, climbed 0.3%, unchanged from the preceding month's upwardly revised reading, while analysts anticipated a 0.5% climb. According to the Atlanta Fed, the economy is set to expand 3.6% in the Q2 of 2017.

Relatively quiet Monday

GBP/USD on route to erasing last week's losses

Even though the US inflation data disappointed on Friday, the Cable was still unable to close in the green zone, but did manage to negate all intraday losses. Trade remained relatively unchanged, with the consolidation trend also intact, thus, a positive development today is expected. The 1.30 mark is the trend's upper border, which is unlikely to be reached today, as no strong market movers are expected to emerge today. However, the nearest resistance, namely the weekly PP, is not much of an obstacle; therefore, more attention should be paid to the second supply area, formed by the weekly R1 and the upper Bollinger band circa 1.2985.

Daily chart

Hourly chart

Traders remain neutral

Market sentiment remains bullish, but now with bulls slightly outnumbering the bears, as 51% of all open positions are long. Meanwhile, 54% of all pending orders are to sell the British Pound.

A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 64% of all open positions are short and the remaining 36% are long. Meanwhile, sentiment at Saxo Bank worsened again, with 62% of traders now being short and the other 38% - long on the Sterling against the US Dollar.

Spreads (avg, pip) / Trading volume / Volatility

Traders still indecisive

© Dukascopy Bank SA

By the end of the next three months traders believe the Cable is to rise above the 1.30 major level, as 60% of survey participants believe so. While the current price is around 1.29, the average forecast for August 15 is 1.3032. The 1.30-1.32, the 1.32-1.34 and the 1.34-1.36 ranges are now the most popular price intervals, having 15% of the votes each, while second comes the 1.28-1.30 interval with 13% of the voters, and the third place is tied by the 1.20-1.22 and the 1.36-1.38, with 10% of poll participants choosing either of these options.