- the portion of orders to acquire the British currency decreased from 59 to 51%
- Market sentiment remains bullish at 55%
- The nearest resistance is located at 1.4446
- Immediate support rests circa 1.4361
- 58% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: US Retail and Core Retail Sales, US PPI and Core PPI, US Empire State Manufacturing Index
Investor sentiment improved on Friday and caused the British currency to strengthen against most major peers. The Sterling gained the most against the Yen, namely 1.31%, amid rising risk appetite. The Pound also added 0.95% versus the Euro and 0.71% against the US Dollar, while the smallest gain was registered against the Swiss Franc – only 0.49%. However, due to an increase in oil prices, the British Pound also weakened against commodity currencies, such as the Loonie, the Kiwi and the Aussie, losing 0.29%, 0.48% and 0.81%, respectively.
The number of Americans applying for unemployment benefits dropped more than expected last week, reaching the lowest level since October, signalling sustained improvement in the labour market. Jobless claims are being scrutinized for signs of labour market weakness following a recent massive stock market sell-off that resulted in a tightening in financial market conditions amid faltering global growth and concerns the world's number one economy was heading into recession. Initial claims for unemployment benefits dropped 18,000 to a seasonally adjusted 259,000 for the week ended March 5, the lowest level since mid-October, according to the Labor Department. Claims have now been below the 300,000 threshold, which is associated with healthy labour market conditions, for a year, the longest such stretch since the early 1970s. The four-week moving average of claims, considered a better measure of labour market developments as it strips out week-to-week volatility, declined 2,500 to 267,500 last week, the lowest level since late October.
So far, the labour market remains on strong footing, with nonfarm payrolls surging by 242,000 jobs in February and the unemployment rate holding at an eight-year low of 4.9%.
Another quiet Monday
Neither from the UK nor the US there are any significant economic data releases scheduled for Monday. On Tuesday, however, the US Retail and Core Retail Sales are due. Both are released by the US Census Bureau measures and the total receipts of retail stores, but the Core Retail Sales exclude the automobile sector. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. According to the forecasts, the data is likely to weaken, compared to the previous month.
GBP/USD to remain under 1.44
The Sterling refuses to edge lower and appears to be headed towards the resistance line above 1.49. However, the Cable is first required to pierce through the supply area at 1.4446, represented by the monthly R1, which limited the pair's volatility on Friday. The 1.44 psychological level is also playing a part in the pair's ability to appreciate, thus, due to no impetus present to push the Pound higher today. As a result, a corrective decline is likely to take place, but the bearish momentum could fail to exceed the 1.4345 mark, as the 55-day SMA and the weekly PP are providing immediate support there.
Daily chart
Through all of the previous week the GBP/USD currency pair has been trading within the borders of an ascending channel. However, the pattern is unlikely to last this week, as either BoE's or Fed's monetary policy statements are likely to cause a breakout in either direction. Today, however, the exchange rate seems to be edging lower and is likely to rebound tomorrow near the 1.43 level.
Hourly chart
Three brokers - three sentiments
Although not as strong as on Friday, but market sentiment remains bullish at 55% (previously 58%). Meanwhile, the portion of orders to acquire the British currency decreased from 59 to 51%.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 57% of them are long, compared to 58% on Friday. At the same time, among Saxo Bank traders short positions take up 54% of the market, while the remaining long ones – 46%.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (58%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The most popular price interval was selected by 17% of the voters, namely the 1.34-1.36 one, while the second most popular choice implies that the Pound is to cost between 1.48 and 1.50 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for June 14 is 1.4225.