- Advantage of sell orders contracted from 22 to 20 percentage points
- Share of longs fell from 59 to 57%
- One of the main resistances is at 1.5526/1.5491
- Support is the 200-day SMA at 1.5341
- Average three-month forecast is 1.5484/li>
- Upcoming events: FOMC Statement, Philly Fed Manufacturing Index (Sep), Building Permits (Aug), Unemployment Claims, UK Retail Sales (Aug)
Yesterday the UK currency outperformed all its major counterparts amid strong fundamentals. The British Pound appreciated the most against the Japanese Yen (1.20%) and the least against the Australian Dollar (0.05%).
Contrary to expectations, British unemployment rate suddenly fell, while wages rose at their fastest pace in more than six years. The UK jobless rate slid to 5.5% in July, hitting the lowest level since 2008. Nevertheless, the claimant count rate remained at 2.3% in August, the lowest rate since February 1975. In a report, Office for National Statistics said that UK claimant count change climbed to a seasonally adjusted 1,200, from -6,800 in the previous month, when the figure was revised down from -4,900. Economists, however, had predicted a decline of 5,000.
Meanwhile, wages continued to rise, with pay excluding bonuses climbing 2.9% when comparing May to July with the same period a year earlier. The figure followed the 2.6% increase in July and beat economists' expectations for a 2.5% gain. The Office for National Statistics said that was the fastest pace of wage growth since the three months to January 2009. With inflation running at 0.1% in July, that suggests the long-running squeeze on living standards has come to an end. City analysts said the pay data showed consumer demand, a key driver of the UK economic growth, would be boosted by the increase in real wages. The Sterling strengthened versus the Euro by one cent following the news and was up 0.7 cents against the Dollar, indicating that markets are expecting a slightly earlier rise in UK interest rates.
Paul Bednarczyk, head of research at 4CAST, is optimistic with respect to the world's largest economy over the coming months, saying that "we should be seeing some better US numbers coming through," which will pressure the Cable to slide to 1.54. Meanwhile, the analyst considers that "over the next three months the Sterling will perform well on a trade-weighted basis," but GBP/USD is still likely to decline to 1.4850. In the longer-term perspective, Bednarczyk is also bearish, setting his 12-month forecast at 1.42, which will be a story of Dollar strength rather than Sterling weakness.
The day has come
The long-awaited and thoroughly discussed day has finally come. And although recently the chances of a rate hike by the Fed have fallen below 50%, they remain substantial, meaning regardless of the decision reaction of the market is likely to be notable. However, we should not forget releases that are to be published before the climax at 6 pm GMT. First on the line is a report on the retail sales in the United Kingdom. According to the market consensus the volume of goods sold in August grew 0.2% compared to the previous month. In four hours this will be followed up by a string of the US data: building permits, weekly unemployment claims and current account. Additional risk event, represented by the Philly Fed manufacturing index, is scheduled at 2 pm GMT.
GBP/USD tests 1.55
Despite the bearish signals the Cable jumped more than 170 pips yesterday on poor US and strong UK data. While many resistances fell victim to the rally, one of the main clusters at 1.5526/1.5491 prevented further advancement. Intactness of this area, created by the 55 and 100-day SMAs and by the monthly PP, is required for the scenario of a sell-off to the Aug low remain valid. Otherwise GBP will be expected to test the last month's high instead.
Daily chart
The hourly chart suggests that GBP/USD has already broken through the 50% retracement of the Aug 25-Sep 4 sell-off. The pair is now getting ready to challenge the 61.8% Fibonacci level at 1.5568. But as mentioned earlier, the current bias is still on the downside.
Hourly chart
Different sentiment at different brokers
Today there are slightly less bulls than yesterday. The share of longs fell from 59 to 57%. The distribution between the buy and sell commands was also little changed. The advantage of the latter contracted from 22 to 20 percentage points.
Elsewhere the sentiment differs. Similarly to yesterday's data OANDA traders remain almost equally divided between the bulls (51%) and bears (49%). On the other hand, the percentage of long positions at SAXO Bank was subject to a significant decline as a result of a spike. The share of longs plunged from 50 down to 35%.
Spreads (avg, pip) / Trading volume / Volatility
Average three-month forecast is 1.5484
Judging by the results of the poll among Dukascopy website visitors, traders do not seem to expect a lot of change in the Sterling-Dollar exchange rate during the next three months. The average forecast for GBP/USD is to trade at 1.5484 on Dec 17, but this does fully reflect the structure of the votes. The most frequently chosen price interval is quite far from the mean value, it is 1.50-1.48 (16% of respondents), followed in popularity by 1.62-1.60 (15% of respondents).
Among the Dukascopy Community members there are more people who expect the Pound to appreciate relative to the Dollar this week, namely 54.5% of them.
Jignesh speculates that the Fed is not going to hike at this meeting, which may lead to a decline in the Dollar's value. However, he added that "upside may be limited as the pair has broken a significant up trend line on the daily a few weeks back". In contrast, ssmoker expects a bearish reaction after the FOMC statement this Thursday. According to him, the currency pair could drop as many as 681 pips in the aftermath of the rate announcement.