- The share of all sell orders returned to its previous Thursday's level of 58%.
- 55% of all open positions are long
- Immediate resistance is at 1.2669
- The closest support is at 1.2622
- Upcoming events: US Initial Jobless Claims, UK Goods Trade Balance, UK Construction Output, US Preliminary Reuters/Michigan Consumer Sentiment
British industrial production posted the biggest monthly fall in more than four years in October after the temporary shutdown of the UK's largest oilfield. According to the Office for National Statistics, industrial output declined 1.3% in the reported month, following September's drop of 0.4% and falling behind the 0.2% rise market forecast. That was the largest decline since September 2012, when the Buzzard oilfield, the biggest in the UK North Sea, was also closed for lengthy maintenance. On a yearly basis, industrial production decreased 1.1% in October, the largest contraction since August 2013. In the meantime, the country's manufacturing output declined 0.9% on a monthly basis over the period after rising 0.6% in September, while markets anticipated a slight decrease to 0.2%.
Nevertheless, the UK economy has so far performed better than expected since the Brexit vote. According to the Bank of England's latest forecasts, the economy is set to expand 1.4% in 2017, compared to a 2.2% growth registered in 2016. Moreover, the Central bank forecasts a threefold increase in inflation next year. Currently, the UK inflation rate is 0.9%. After the release, the GBP/USD pair was seen trading below $1.2600, while the EUR/GBP pair rose above 0.8500.
Basically uneventful Thursday
On Thursday there is only one event that could have some impact on the GBP/USD pair, the Initial Jobless Claims. They are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in the market, which influences the strength and direction of the US economy. However, the market does not usually have a significant reaction to the given piece of news.
GBP/USD attempts to regain the bullish momentum
The immediate support cluster, represented by the 23.60% Fibo and the weekly PP, managed to limit the losses on Wednesday, thus, keeping the Cable above the 1.26 mark. This time the mentioned support area is significantly weaker, as it is now formed only by the weekly pivot point. Despite this fact, technical studies are now suggesting the Pound is to outperform the US Dollar today. Consequently, the GBP/USD pair has the chance to erase yesterday's losses completely, but only if the 23.60% Fibo, which is now the nearest resistance, is overcome.
Daily chart
The Cable reached its first target yesterday, the 200-hour SMA, where demand was sufficient to trigger another rebound. The pair could now continue edging higher towards the broadening rising wedge's resistance line, despite this two-day setback.
Hourly chart
Traders mostly bullish
Traders' sentiment weakened once again, as 55% of all open positions are long today, compared to 59% on Wednesday. At the same time, the share of all sell orders returned to its previous Thursday's level of 58%.
A similar situation is observed elsewhere. For example, 59% of positions open at OANDA are currently long. This is more than the share of shorts (41%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 59% of traders being long and 41% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be higher than the level where it is now. While the current price is around 1.24, the average forecast for March 08 is 1.251. Furthermore, the 1.30-1.32 interval is now the most popular one, having 14% of the votes. On the second place in terms of the votes is the 1.16-1.18 (12%) interval, followed also by the 1.18-1.20, 1.20-1.22, 1.22-1.24, , 1.24-1.26, 1.26-1.28 and 1.32-1.34 intervals, all with only 8% of the votes. Moreover, 55% all survey participants believe the Cable is to fall above 1.24.