- 56% of all pending orders are to buy the Pound
- 59% of all open positions are long
- Possible upside limit for this session located near the 1.3130 mark
- Significant support rests circa 1.2955
-
Upcoming Events: US Building Permits, US Housing Starts
Britain's inflation fell unexpectedly in June from a four-year high reached in the previous month. The Office of National Statistics reported that the country's Consumer Price Index dropped 2.6% year-over-year, missing expectations for an unchanged reading of 2.9%, while the monthly rate slipped from 0.3% to 0.2% in the in June. The Core CPI, which excludes volatile items such as food and fuel, registered a weaker-than-expected reading of 2.4%, following May's 2.6% figure.
The surprise fall, mainly driven by lower prices of oil and certain recreational and cultural goods, was partially offset by a rise in prices of furnishings and furniture. The strong decrease in the value of the British Pound after Brexit raised costs of imported goods, suggesting that inflation would show at least 3% pace of growth this year. Though, the UK economy being heavily dependent on consumers is expected to face further effects of subdued spending due to outpaced wage growth. Moreover, the weakness in recent reports hinted that the Bank of England is less likely to raise interest rates in the near term.
Watch More: Dukascopy TV
Only fundamentals at 1230GMT
The only sets of data scheduled for today are from the United States, that is, the number of building permits and housing starts at 1230GMT, the former of which is considered more significant.
Read More: Fundamental Analysis
GBP/USD falls in response to weak data
Tuesday's session started with the Pound appreciating substantially against the US Dollar, which resulted in the rate reaching the upper channel boundary. However, weak data from the UK set the Pound for a free fall down to the 1.3020 mark, thus erasing all morning gains. The British currency bounced off the weekly PP at 1.3009, but failed not recover, thus remaining stranded between the 55– and 100-hour SMAs until the point of writing. The market may be relatively calm and therefore remain in this range prior to US data release at 1230GMT after which some changes should occur. Gains could be capped at the upper channel boundary, while losses should be limited by the 200-hour SMA circa 1.2940. In case the given data disappoint, the rate might remain below the 100-hour SMA for the whole session.
Hourly chart
Despite the bullish market sentiment that guided the GBP/USD currency pair on Tuesday morning, it turned to the downside after weak data release mid-yesterday. Thus, the Sterling continues to depreciate against the US Dollar for the third consecutive day. The closest resistance is still formed by the 38.2% Fibo, while support is provided by the 55-hour SMA and the weekly PP circa 1.2890.Daily chart
Read More: Technical Analysis/
Market sentiment remains neutral
The bullish market sentiment has decreased slightly, as 59% of open positions are long (63% on Tuesday). In addition, 56% of pending orders are to buy the Pound.
On the contrary, traders at Saxo Bank are bearish on the pair, with 63% of traders holding short positions (67% on Tuesday). Moreover, 54% of OANDA clients hold short positions.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound falling
© Dukascopy Bank SAThe majority of traders believe that the Cable may fall below the 1.30 mark three months from now, as 57% (+6%) of survey participants share this belief. The current spot price is around 1.3015, while the average forecast for October 19 is 1.2929 (1.2975 on Tuesday). The 1.24-1.26 range remains the most popular price interval, having 43% of the votes (+5%).