- The buy and sell orders edged higher, reaching a perfect equilibrium
- 53% of traders are now long the Pound
- 18% of the poll participants expect the British Pound to cost between 1.60 and 1.62 dollars after a three-month period
- Immediate resistance lies in face of the 20 and 55-day SMAs around 1.5540
- The nearest support rests around 1.5477, represented by the weekly S1
- Upcoming events today: US Markit Manufacturing PMI, US New Home Sales
The British currency declined against most major peers, amid worse-than-expected Retail Sales data. The sharpest loss was detected against the Euro, 1.18%, following with a 0.77% and 0.76% declines versus the Loonie and the Yen. The Sterling held most resilient versus the Australian Dollar, having lost only 0.39% against it.
UK retail sales saw an unexpected decline in June amid decrease in sales of food, other household goods, and other goods. The retail sales saw a 0.2% decline for the reported period compared to 0.4% increase expected by economists, which is the first time sales growth has contracted since March this year. However, in the quarter ending in June, sales growth rose 0.7%, the 28th straight quarterly increase. Moreover, amount of money spent in the retail industry in June surged by 0.9% compared with the same period in 2014, while declined 0.1% compared to May 2015. Decline was caused, as spending by British consumers on furniture and appliances dropped 0.9%, while on food by 0.3%.
Despite the disappointing June figures, the outlook by investors and economists remains positive due to appreciating Sterling, low inflation rate, and falling oil prices. These factors will boost disposable income for consumers to spend on goods, thus further underpinning economic growth and recovery. Nonetheless, growth of retail sales will play a key role in the BoE's decision on when to hike interest rates. Last week, the central bank's governor Marc Carney hinted a possible rate hike by the end of 2015. However, the timeline for this important decision could be impacted by further disappointing sales growth figures in the following months.
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.
US Flash Manufacturing PMI and New Home Sales
With no significant data to influence the Cable from the UK side today, all focus is now laid on the US Flash Manufacturing PMI and New Home Sales. Both events are forecasted to remain flat, although the Markit Manufacturing PMI has a history of showing worse-than-expected results, whereas the New Home Sales, on the contrary, tend to rise more than anticipated. Furthermore, both events are considered to be rather important, thus, the impact on the market price should be substantial enough. The magnitude of the improvements or deteriorations will determine whether the Cable is to rise or to fall deeper today.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 en route to erase last week's gains
The Cable failed to rise on Thursday, as the worse-than-expected UK fundamentals pushed the GBP/USD currency pair back down. The Sterling reached a daily low of 1.55, but stabilised at 1.5517, leaving the door open for more weakness. The 20 and 55-day SMAs are likely to prevent the pair from advancing today, thus, a decline towards 1.5477, namely the weekly S1 is expected. Meanwhile, technical indicators are unable to confirm the bearish outcome, as most of their signals are mixed.
Daily chart
The Sterling was unable to pierce the two-week high once again, which resulted in the GBP/USD sustaining heavy losses. The 200-hour SMA was easily pierced, as the pair even fell under the possible support trend-line. The 1.55 major was providing addition support, but recently was broken as well, making the 1.5450, namely the previous week's low, the new target.
Hourly chart
Bulls keep prevailing over bears
Market sentiment slightly improved, as 53% of traders are now long the Pound (previously 51%). The buy and sell orders also edged higher, reaching a perfect equilibrium.
Other market participants retain a bearish outlook towards the GBP/USD. The SAXO Group traders' sentiment reached a perfect equilibrium. At the same time, OANDA's market sentiment worsened, as the share of shorts now takes up 51% of the market.
Spreads (avg, pip) / Trading volume / Volatility
18% of the poll participants expect the British Pound to cost between 1.60 and 1.62 dollars after a three-month period
According to the survey conducted between June 24 and July 24, 18% of traders assume the GBP/USD currency pair will cost between 1.60 and 1.62 dollars within three months. However, the second place is divided between two price intervals, 1.50-1.52 and 1.58-1.60, both selected by 12% of the surveyed. The mean forecast for October 24, on the other hand, is 1.571.
This week, the Cable is seen to finish the week at around the 1.564 level, as the vast majority of survey participants are bullish on the currency pair. Currently, 77% of all polled traders are optimistic on the future of the pair, compared with 62.5% last week.
More than three quarters of traders expect the Sterling to outperform the American Dollar by the end of the week. One of the traders with a bullish perspective towards the Cable, iiivb, said that "GBP is playing as a safe-haven, while the Euro value is being repriced due to Greek bailout." Stix, on the other hand, holds a bearish view on the GBP/USD currency par. He assumes that the price is currently supported by a lot of average line supports; therefore, sideways movement is his estimation. "I see a slight bearish trend in this sideways movement", he mentioned.