- Distribution between the buy and sell orders in the 100-pip range from the spot is in perfect equilibrium
- Bulls slightly grew in numbers: at the moment 69% of positions are long
- 14% of traders see either 1.54/1.56 or 1.58/1.60 in three months
- Closest resistance remained is now located at 1.5366, represented by the 20-day SMA, while the nearest support rests at 1.5325, where weekly S1 and monthly PP merge
- Upcoming events: UK Services PMI, US ADP Non-Farm Employment Change, US ISM Non-Manufacturing PMI, US Crude Oil Inventories, UK Official Bank Rate, US Unemployment Claims
The Sterling performed worse than yesterday against most majors, as it added only 0.26% against the Swiss Franc. Furthermore, the Pound slumped 0.70% versus the Aussie, 0.57% against the Kiwi, and 0.37% versus the Yen.
The British construction sector experienced the strongest growth in four months, led by increases in new orders and supported by easier credit conditions and a low interest rate environment. The Markit/CIPS UK construction PMI rose to 60.1 in February, compared with 59.1 a month earlier, marking the 22nd consecutive month above the 50-mark threshold. The housing, commercial and civil engineering sectors all showed signs of accelerating growth. In contrast, the official data showed output in the UK construction sector plummeted markedly in the December quarter, falling 2.1% and following a rise of 1.6% in the previous quarter. Yet, output in the sector, which accounts for 6.3% of the UK's total GDP, was 4.8% higher than in the same period in 2013.
In its February forecast, the BoE said it expected the UK growth in the fourth quarter to be revised slightly upward to 0.6%. Additionally, the central bank left 2015 economic output unchanged at 2.9%, but revised up 2016 growth to 2.9%, from the 2.6% estimated in its November forecast. The BoE also added that cheap oil should help boost real income and consumer spending. Meanwhile, the National Institute of Economic and Social Research predicts Q4 growth to have slowed to 0.5%, but the institute revised growth outlook for the whole of 2015 up to 2.9%, from the 2.5% it had forecasted last November.
John Redford, senior FX consultant at Worldwide Currencies, talks about the one-month outlook on the GBP/USD: "According to what the reaction is after the elections in May, I think that the Dollar should ultimately spare a little bit on the firm side, it is almost as I would much rather be short ahead of 1.57 along approaching 1.50, because I think it could actually see that trading range."
UK Services PMI likely to lift the Pound
On Wednesday, the UK Services PMI index is expected to slightly increase, which might help the Sterling to appreciate, while later the ADP Non-Farm Employment Change is likely to have an opposite effect, as the US data are anticipated to improve.
GBP/USD sliding further down
John Redford also speaks about the GBP/USD forecast after the election, when "we could see a move to 1.57, potentially 1.60." Still, he sees "the general stronger Dollar thing will continue over period."
Sterling keeps surprising with its behaviour, as the currency edged down again on Tuesday. Even though the decline was insignificant, it still remains a loss. Furthermore, by virtue of demand at the 20-day SMA the Pound settled at 1.5357. Today the technical studies also suggest an increase in the value of the Pound. Meanwhile, the UK Services PMI data release is likely to have a high impact on the Sterling, and stronger figures are expected. Closest resistance remains unchanged at 1.5438, the current location of the weekly PP.
Daily chart
The hourly chart shows a significant plunge in Sterling's value over the night; however, a strong correction took place afterwards. Even though the Pound managed to rebound, the 20-hour SMA provided resistance and is now forcing the pair to go back down. As mentioned before, losses should not last long, bullish outcome is highly possible, as the expected data releases suggest so.
Hourly chart
More bulls again
Bulls slightly grew in numbers: at the moment 69% of positions are long. Meanwhile, the distribution between the buy and sell orders in the 100-pip range from the spot is in perfect equilibrium.
The sentiment among the SAXO Bank clients remains in equilibrium, whereas OANDA traders, although not as strongly as yesterday, still have a bullish outlook with respect to the Cable, with 59% of all positions being long.
Spreads (avg, pip) / Trading volume / Volatility
14% of traders see either 1.54/1.56 or 1.58/1.60 in three months
This week experienced minor changes in the market preference, as now bullish votes take up almost 60% of all responses. The average market expectation for March 6 is located around the 1.5530 level.
Geula4x is expecting a bullish scenario regarding the GBP/USD pair, as in his opinion, price has been moving in an upward channel for a month now. At the same time, Amaunat holds a bearish view on the pair, reasoning that "divergence is drawing on the RSI on H4," while "the price is in current trend channel" and "breaking the bottom should maintain the bearish market."