- The share of sell orders takes up 71% of the market
- 63% of traders are long the Pound
- Immediate resistance is at 1.2498
- The closest support is at 1.2478
-
Upcoming Events: US Initial Jobless Claims, Fed Chair Yellen's Speech, US New Home Sales
British inflation surpassed the Bank of England's target of 2% last month, official figures released on Tuesday showed. The Office for National Statistics reported that consumer prices advanced 2.3% in February, following the preceding month's 1.8% increase and surpassing analysts' expectations for a 2.1% climb. Soaring inflation and the weak British Pound may force the Central bank to raise interest rates in the upcoming months. Last week, Kristin Forbes, an external member of the BoE's MPC, was the only one to vote for a rate hike at the March policy meeting. However, other members signaled they could step on the path of rate increases anytime soon if consumer prices continue rising and the economy maintains a strong foothold. Back in February, the annual rate of inflation in the UK rose above the BoE's target for the first time in more than three years, but the Governor Mark Carney claimed that it was important not to overreact to just one data point.
Meanwhile, the core annual inflation rate came in at 2.0% in February, compared to January's 1.6% gain, while analysts anticipated an increase of 1.7%. The rise in both headline and core inflation was driven by the weak Pound, which also provided significant support to British manufacturers, making them more competitive in overseas markets.
Watch More: Dukascopy TV
Yellen's Speech due today
With the UK Retail Sales already released and showing strong figures, further attention turns to the US data, namely the Initial Jobless Claims and the New Home Sales. This data is unlikely to have a significant impact, but could still limit the Cable's gains. The Jobless Claims 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 this market, which influences the strength and direction of the US economy. The New Home Sales are an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes so, as a result, the demand for goods, services and employees is stimulated. Fed Chair Yellen is also scheduled to speak today, her words are likely to outweigh the US fundamentals if relevant to rate hikes information is to be provided.
Read More: Fundamental Analysis
GBP/USD takes another shot at conquering 1.25
In spite of strong volatility, the Cable managed to remain relatively unchanged on Wednesday, retaining its position above the monthly PP. The Pound keeps taking advantage of the Buck's weakness due to lower US Treasury yields, therefore, another positive outcome and a surge beyond 1.25 is possible. The GBP/USD pair has only one solid resistance on its path, namely the cluster around 1.26, which could prevent the Sterling from reaching its target—the 23.60% Fibo at 1.2672. Nevertheless, today's bullish potential is likely to be very limited, as there are no strong market movers present. Meanwhile, technical studies are also unable to confirm the possibility of a positive outcome.
Daily chart
© Dukascopy Bank SA
The situation did not change on the hourly chart as well, being that the Cable is still located within the borders of two trend-lines. There was some downside volatility, but it was insufficient to retest the lower trend-line, thus, confirm it. Another retest of the upper trend-line is expected, which could provide the bearish momentum required for reaching the lower line.Hourly chart
© Dukascopy Bank SARead More: Technical Analysis
Traders mostly bullish
Today 63% of traders are long the Pound (previously 60%), but the share of sell orders is significantly higher, taking up 71% of the market.
A slightly less optimistic situation is observed elsewhere. For example, 55% of positions open at OANDA are currently long. This is more than the share of shorts (45%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is close to equilibrium, with 53% of traders now being long and the other 47% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
© Dukascopy Bank SABy the end of the next three months traders expect the Cable to fall under the 1.22 major level, as 51% of survey participants believe so. While the current price is around 1.23, the average forecast for June 23 is 1.227. The 1.14-1.16 range is now the most popular price interval, having 15% of the votes, while on the second place is the 1.30-1.32 price range, with 13% of poll participants choosing it. Furthermore, the 1.16-1.18, the 1.20-1.22 and the 1.28-1.30 intervals were each chosen by 11% of the voters.