- The number of orders to buy the British currency slid from 62 to 53%
- 55% of traders now have a positive outlook towards the Pound
- 18% of traders assume the Sterling will cost between 1.50 and 1.52 dollars in three months
- The nearest resistance is located around 1.5753, the weekly PP
- Immediate support, represented by the monthly R1, lies at 1.5650
- Upcoming events today: UK Current Account, UK Final GDP, MPC Member Haldane Speech, US Chicago PMI, US CB Consumer Confidence
Despite appreciating on Monday, the Sterling still declined against most major peers over the weekend. The price opened significantly lower versus the Yen, making the Pound lose 1.14% against, following with a 0.92% loss versus the Swissie and 0.66% against the Euro. The British currency still managed to edge 0.62% higher versus the Loonie, while remaining relatively unchanged against the US Dollar (-0.05%) and the Kiwi (-0.11%).
British mortgage approvals unexpectedly dropped in May after rising in April to the highest level in more than a year. Approvals for house purchases decreased to 64,434 from a downwardly revised 67,580, according to the Bank of England. The number of approvals declined throughout most of 2014, easing house price growth and alleviating concerns about the housing market bubble. Net mortgage lending, gross loans less repayments, rose 2.098 billion pounds in May, the biggest increase since November, the BoE said, slightly more than a forecast of 2.05 billion pounds and compared with 1.7 billion pounds in April. The BoE said consumer credit grew by 1.0 billion pounds in May, down from 1.176 billion pounds in April. Economists had expected an increase of 1.1 billion pounds. Despite May's slowdown, consumer credit on a three-month annualised basis rose 8.5 percent, the highest since August 2005. Lending to non-financial businesses rose by 700 million pounds in May, the BOE said. The BoE also said total net lending to individuals increased by 3.1 billion pounds last month, below forecasts for 3.3 billion pounds and up from 2.9 billion pounds in April. Meanwhile, the M4 Money Supply rose by a seasonally adjusted 0.5% in May, in line with expectations and following an increase of 0.4% in April.
Meanwhile, the BoE chief economists Andrew Haldane argued that the base interest rate should be cut immediately for a period of around one year to push inflation back to target.
Paul Bednarczyk, head of research at 4CAST, is optimistic with respect to the world's largest economy over the coming months, saying that "we should be seeing some better US numbers coming through," which will lead the Cable to 1.54. Meanwhile, the analyst considers that "over the next three months Sterling will perform well on a trade-weighted basis," but GBP/USD is still likely to decline to 1.4850. In the longer-term perspective, Bednarczyk is also bearish, setting his 12-month forecast at 1.42, which will be a story of Dollar strength rather than Sterling weakness.
UK Current Account and US CB Consumer Confidence
The UK Current Account keeps posting deficits. Moreover, historical data shows that in the six previous months data turned out to be worse-than-expected, therefore, there is a good chance today's release will show poor figures, despite expectations. However, the UK Final GDP is likely to show more growth than in the previous quarter, but the effect on the Sterling is to be less than the one of the Current Account. Furthermore, at 17:00 GMT the US CB Consumer Confidence index is to be posted. According to the forecasts, the index is being expected to show improvements and unless the fundamental data disappoints, the Cable should fall.Ross Walker, economist at Royal Bank of Scotland Group, suspects that GBP/USD may descend to 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross mentioned that "the main driver in many ways, as well as the main support in recent times, have been the expectations that the Bank of England will raise interest rates at some point next year, probably the beginning 2016."
GBP/USD sets new target of 1.58
On Monday, the Sterling appreciated against the US Dollar, but not as much as anticipated. The immediate resistance failed to stop the rally, but the given pair also did not reach the weekly PP at 1.5753, as it stabilised at 1.5727. Technical indicators keep showing bullish signs, although not as strong as yesterday, but still suggesting the Cable is to surge today. The weekly PP now acts as the immediate resistance, but we might even see a hike up to 1.58 if the fundamentals do not disappoint.
Daily chart
The Cable attempted to reach the 1.58 major level yesterday, but still fell ten pips behind. The Sterling met resistance in face of the 200-hour SMA, which in turn pushed the pair back down, forcing it to keep sliding down the resistance trend-line. The trend-line is to be retested today, increasing the risks of the GBP/USD falling deeper down.
Hourly chart
Bears prevailing over bulls
Long and short positions broke out of the equilibrium, as 55 of traders now have a positive outlook towards the Pound. Meanwhile, the number of orders to buy the British currency slid from 62 to 53%.
Although slightly weaker, but other market participants have a bearish outlook towards the Cable. The SAXO Group's clients still have 70% of short positions, while the bearish market sentiment of OANDA slid from 58 to 54%.
Spreads (avg, pip) / Trading volume / Volatility
18% of traders assume the Sterling will cost between 1.50 and 1.52 dollars in three months
The survey participants have high expectations concerning the Cable, as the majority of them, namely 64%, assume the Sterling will cost more than 1.54 dollars after three months. However, the most popular price interval now remains between 1.50 and 1.52 dollars, chosen by 18% of the surveyed, while the second place is now taken by the 1.60-1.62 price range, voted for by only 17% of the participants. According to the survey conducted between May 30 and June 30, the mean forecast for September 30 is 1.5713.
At the end of the previous week, the Sterling was little changed, as uncertainty over Greece's debt negotiations sapped investor demand for the pair. This week, the Pound is seen to reach level of 1.5745, as majority of poll participants are short on the currency.
Once again we have AgentSmith, a member of the Dukascopy community, sharing his opinion on the Cable. AgentSmith is in the minority of traders, as he believes the Sterling is to outperform the Buck by the end of the week. "Currently price is overbought and could move sideways, but I am expecting the price to close around 1.6000 on this coming Friday, June 26", he said. AgentSmith's main rival for this week is geula4x, another community member, who assumes the Pound is to sustain losses. Geula4x believes that since the Cable opened the week with a big gap down and Greece has not reached an agreement with creditors, risks of Greece leaving the Euro Zone rise. "Therefore, USD bulls seem better positioned to take control this week", he added. Geula4x also believes that 1.5770 is the top price the Sterling might reach this week.