- The number of purchase orders surged from 47 to 65%
- 60% of all open positions are long
- The main short-term resistance lies at 1.4481
- Support is around 1.4440, namely the 20-day SMA, the up-trend, the weekly S1 and the monthly PP
- 59% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK CPI and Core CPI, UK PPI Input and Output, UK RPI, UK HPI, US Empire State Manufacturing Index, US NAHB Housing Market Index
The Sterling experienced mixed performance on Monday, having appreciated against some major peers, but declining against the others. With the return of risk appetite, the Japanese Yen's safe-haven status faded, causing the Pound to appreciate 0.79% against it. Gains of 0.56% and 0.43% were also registered against the Swissie and the Euro, respectively. At the same time, the British currency weakened against all commodity-based currencies, which in turn were boosted by hopes of OPEC cutting output, which resulted in an oil price rebound. The Sterling dropped 0.87% versus the Aussie, 0.74% versus the Kiwi and 0.66% against the Loonie. The Cable, however, also ended the day on the downside, slumping 0.47%.
US retail sales climbed slightly in January, rising for the third consecutive month, evidence that Americans kept shopping despite steep declines in equity prices. According to the Commerce Department, retail sales increased a seasonally adjusted 0.2% last month, the same as in December. Excluding the effect of falling gas prices, sales increased 0.4%. Americans boosted their purchases in January of autos, home supplies and groceries, and spent more online. Greater job security, rising wage growth and falling gasoline prices may be encouraging more consumers to loosen their purse strings after a fourth-quarter slowdown. A pickup in household purchases, which makes up the lion's share of the economy, would help the US prevent the negative effects of a strengthening US Dollar, weak foreign demand and tumultuous financial markets.
Continued improvement in the labour market is keeping Americans spending. US employers added 151,000 to payrolls in January after expanding headcounts by 262,000 the in the prior month. In addition to that, average hourly earnings increased 2.5% in the 12 months ended January following a 2.7% gain in December that was the most since 2009. Consumers are the engine that has been powering the US economy for the past two years as they account for roughly 70% of GDP.
UK inflation data is the main driver today
There is a rather large number of economic data releases today. Concerning the UK, the most important even will be the Consumer Price Index, which is released by the National Statistics and is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Concerning the US, the Empire State Manufacturing Survey is due. It is conducted by the Federal Reserve Bank of New York gauges business conditions for New York manufacturers. It is a leading indicator of economic health, a strong reading of which could bring back confidence in global economic growth.
GBP/USD risks breaking the four-week bullish trend
The British currency started the week with a rather serious decline, but with the support line untested. Technical indicators are shifted from bullish to mixed signals in the daily timeframe, suggesting a possibility of a bearish reaction today exists. The up-trend is reinforced by the monthly PP, the weekly S1 and the 20-day SMA, thus, we should not see a more than 50-pip slump; unless inflation data disappoints dramatically. Meanwhile, the weekly PP is the closest resistance, but is unlikely to provide sufficient supply and limit the gains.
Daily chart
According to the hourly chart, the GBP/USD could continue sliding down until the end of the week, when the bullish trend is expected to prevail. The resistance line, although was violated yesterday again, somewhat remains in play. However, there is a risk of the fundamental data providing sufficient impetus for a breach to occur within the next two days.
Hourly chart
Three brokers - three sentiments
Today 60% of all open positions are long, compared to 53%. At the same time, the number of purchase orders surged from 47 to 65%.
The clients of the other two brokers seem to have different opinions on GBP/USD. OANDA traders are bullish on the UK currency. Right now, 59% of them are long, compared to 61% on Monday. At the same time, Saxo Bank traders are net short the currency pair: 58% of open positions are short and 42% are long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (59%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price interval was selected by 14% of the voters, namely the 1.40-1.42 one, while the second most popular choice implies the Pound is to cost either between 1.46 and 1.48 dollars or between 1.48 and 1.50 dollars in three months, both chosen by 12% of the surveyed. At the same time, the mean forecast for May 16 is 1.4379.