- Pending orders in 100-pip range from the current market price slid to the negative side (42% bullish / 58% bearish)
- The pair could fall in value, with the closest support at 1.5542 (2014 low)
- An advance is also a possibility, but it should be limited by the weekly S1 at 1.5584
- Upcoming events: UK Retail Sales, US Unemployment Claims, US Philly Fed Manufacturing Index
The vote of the MPC remained unchanged in December, with the majority of policy makers believing that weak inflation outlook warranted maintaining interest rates intact at all-time low of 0.5%. The BoE officials, however, voted unanimously to keep the size of its asset purchases unchanged at 375 billion pounds. Martin Weale and Ian McCafferty reiterated their call for a lift in the benchmark rate to 0.75% to keep a lid on future inflationary pressures. Earlier in the week, the Bank of England Governor Mark Carney said the UK economy could benefit from the recent slump in oil prices, which is seen boosting consumers' spending power and supporting the global demand. Meanwhile, the majority on the board concluded that subdued pay growth, plunging commodity prices are likely to keep inflation weak.
At the mean time, Fed Chairwoman Janet Yellen said that the US central bank plans to hike interest rates next year, but it would take a patient approach in deciding on a timing of the first rate hike, which would not take place any earlier than late April. Yellen's comments along with the FOMC statement indicated that the Fed was not inclined to start normalizing its monetary stance more quickly despite recent upbeat economic data, including stronger employment growth and falling oil prices. Still-elevated unemployment rate and below-target inflation provides the central bank with flexibility to take gradual approach to lifting rates. The FOMC statement also showed that the overwhelming majority of policy makers expect the Fed to raise the federal funds rate by 0.75-1.75 percentage points in 2015.
UK's retail sales, US unemployment claims awaited
After yesterday's FOMC meeting, the traders' are much more bullish on the US currency; however, today they will measure the nation's unemployment claims and Philly Fed manufacturing index. At the same time, the UK's retail sales data will be released that are expected to decrease from the previous month.
GBP/USD re-tests this year's low
Already for more than a month GBP/USD is testing the strength of the down-trend, especially its upper trend-line, that started to take its shape on July, when the pair reached a six-year high at 1.7193. The pair has returned to trade inside the boundaries of the down-trend, after braching it to the upside. The pair is hovering around the lower levels this year, namely around 1.1550 and there still is a downside risk of the pair falling lower, since it is back on its down-trend.Daily chart
GBP/USD has plummeted below the weekly S1 at 1.5586 and is hovering around this year's lows. Moreover, the risk of the pair falling even lower is increasing, despite the daily and monthly technicals being to the upside. To our mind, a dip below this year's low at 1.5542 could provoke a sell-off towards the monthly S1 at 1.5484.
Hourly chart
Bullish positions increase, while pending orders set to sell
Concerning the orders, 58% of them are set to sell the Sterling against the Greenback. It proclaims that, if the pair appreciates, in the near-term it may be stopped by the monthly PP and is likely to be pushed to the downside by this substantial resistance level.
Although, in case the pair returns to trade in the boundaries of the down-trend then the bearish pressure may become even stronger in the foreseeable future.
Spreads (avg,pip) / Trading volume / Volatility
Community expects Pound slide lower
Jignesh, one of the community members participating in the survey, sees the pair depreciating towards the 1.55 mark "GBP/USD has faced rejection off a downwards trend line on the 1H and continues it's bearish momentum. 1.5500 should offer decent support for the pair". However, he adds that "Wednesday's FOMC will be a big driver for the USD".
Meanwhile, traders, who were asked regarding their longer-term views on GBP/USD between Nov 11 and Dec 11 expect, on average, to see the currency pair at 1.5721 by the mid-March. Though the largest portion of participants, namely 17% of them, believe the exchange rate will rebound to the 1.60/1.62 region in sixty days. Additionally, 45% of the market participants see the pair falling below the 1.56 mark.