- 51% of all pending orders are to buy the Pound
- 52% of traders are long the Sterling
- Immediate resistance is around 1.29
- The closest support rests at 1.2815
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Upcoming Events: UK Net Lending to Individuals, US Pending Home Sales, US Beige Book, Chicago PMI
The US economy expanded at a stronger-than-initially-expected pace in the March quarter; however, an economic slowdown remained on the table in the second quarter. The Commerce Department reported on Friday that Q1 GDP growth came in at a seasonally adjusted annualised pace of 1.2%, compared to an originally reported pace of 0.7%. Meanwhile, analysts expected the economy to expand 0.9% in the reported quarter.
However, that was the worst performance over the past 12 months. Back in the Q4 of 2016, the economy grew 2.1%. Analysts suggested that the Q1 slowdown was mainly driven by the US President Donald Trump's inability to boost economic growth as promised. Even though the Q1 figure was revised up sharply, weak retail sales, business investment, falls in investment inventories and an increase of the goods trade deficit destroyed hopes for a rebound in the Q2. A separate report released by the Commerce Department showed that new orders for US-manufactured durable goods dropped 0.7% last month, whereas orders for core durable goods fell 0.4%.
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Most attention turns to US fundamentals again
There is only one relevant event from the UK today, namely the Net Lending to Individuals. It is a monthly measure of growth rates, amounts outstanding and changes in total lending to individuals, divided into lending secured on dwellings and consumer credit. It shows a picture of whether or not consumers are willing to spend money. As for the US side, the Pending Home Sales are due. They are a leading indicator of trends of the housing market in the US. They capture residential housing contract activity of existing single-family homes. As the housing market is considered to be a sensitive factor to the US economy, it generates some volatility for the USD. Another relevant event will be the US Beige Book, which is released by the Fed. The Book reports on the current US economic situation. Through interviews with key business contacts, economists, market experts and other, sources are gathered by each of the 12 Federal Reserve Districts. The survey gives a picture of the overall US economic growth. An optimistic view of those authorities is considered to be positive for the USD. Finally, the Chicago PMI, which captures business conditions across Illinois, Indiana and Michigan. This index is an indicator of business trends and is interrelated with the ISM Manufacturing Index. It is widely used to indicate the overall economic condition in the US.
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GBP/USD in limbo between 1.28 and 1.29
The Cable managed to recover from its intraday low yesterday, but failed to breach the immediate resistance, which resulted in trade remaining relatively flat. The pair is likely to keep consolidating today as well, but with risks still skewed to the downside and the 1.28 major level being the main threshold. A decline towards this handle would not mean a complete breach from the broadening rising wedge pattern, as a potential recovery could still take place by the end of the week. Meanwhile, technical indicators retain mixed signals, unable to confirm the possibility of the bearish momentum prevailing today.
Daily chart
The Cable refuses to leave the wedge's support line, as the exchange rate keeps returning after every rally attempt. The 200-hour SMA also keeps sliding down, which could soon become not only a strong resistance, but act as a catalyst and cause the up-trend to get pierced.Hourly chart
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Bearish sentiment still prevails
Both traders' sentiment and the portion of purchase orders remain unchanged since Tuesday, taking up 52% and 51% of the market, respectively
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 59% of all open positions are short and the remaining 41% are long. Meanwhile, sentiment at Saxo Bank is also bearish, with 59% of traders now being short and the other 41% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
© Dukascopy Bank SATraders believe the Cable is to rise above the 1.30 major level by the end of the next three months, as 58% of survey participants share this belief. While the current price is around 1.2850, the average forecast for August 31 is 1.3027. The 1.34-1.36 range is now the most popular price interval, having 24% of the votes, while on the second place are the 1.20-1.22 interval, with only 16% of the voters choosing it.