- The portion of buy orders dropped down to 58%
- Bulls now take up 59% of the market
- Immediate resistance is represented by the 20-day SMA around 1.5144
- The weekly PP at 1.5058 is the nearest support
- 70% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events today: BoE Governor Carney Speech, US Labor Market Conditions Index, US Consumer Credit
The Sterling experienced mixed performance on Friday and over the weekend, with insignificant changes against most major peers. The Pound advanced against three major currencies, namely the Euro, the Yen and the Swissie, adding 0.32%, 0.20% and 0.16%, respectively. Mild losses were registered against the Aussie (0.16%), the Loonie (0.17%) and the US Dollar (0.21%), whereas the GBP suffered the most versus the Kiwi, slumping 1.07%.
Business activity in the UK services sector rose at the fastest pace in four months in November, suggesting a stronger economic growth in the final quarter of the year. The Markit/CIPS UK services PMI climbed to 55.9 last month from 54.9 in October, offsetting the weakness in manufacturing and construction sectors. There were some signs in the services survey that price pressures were building, albeit from low levels. Input prices, which include wages, rose at the fastest pace in four months, something that is likely to cheer up the Bank of England. Markit's UK composite PMI, which combines data from the manufacturing, services and construction surveys, was steady in November at 55.7, the highest level since July. The British economy is on track to grow 0.6% in the fourth quarter, accelerating from the 0.5% pace in the July-September period. The Office for Budget Responsibility revised up the growth outlook for next year, saying it predicts the UK economy to grow by 2.4% in 2015 and 2016 - up one basis point for 2016 when compared to the July outlook. It also upped the growth outlook for 2017 by one basis point to 2.5%, before sliding to 2.4% in 2018, and slightly lower to 2.3% in 2019-2020.
The Bank of England announces its next policy decision on December 10. Traders are betting officials will keep the benchmark rate at a record-low 0.5% through 2016.
US Consumer Credit
Although the UK side brings no fundamental economic data today, the Bank of England head's speech today could influence the Sterling crosses, as the Governor has more influence on the country's currency than anyone else. This leaves the US Consumer Credit the only relevant data release to influence the Cable. The Consumer Credit is released by the Board of Governors of the Federal Reserve and is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means. The Labor Market Conditions Index is also released today, but it tends to have no effect on the exchange rates, as the data used in calculating the index was released previously. The Consumer Credit, however, is forecasted to worsen and could help the GBP/USD recover from intraday losses.
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 at the beginning 2016."
GBP/USD anchored around 1.51
The GBP/USD currency pair weakened on Friday, with intraday volatility reaching the 1.5080 level, but with trade closing at 1.5117. Today the Sterling is expected to extend its correction and continue edging lower, as technical indicators suggest in all timeframes. Immediate support is represented by the weekly PP, now located at 1.5058. Meanwhile, the ultimate low rests around 1.49, namely the lower border of the falling wedge, which should limit this week's losses and preserve the pattern. At the same time, the 20-day SMA is providing resistance around 1.5144, in case bulls take over.
Daily chart
The pair was unable to extend its rally above the 23.60% Fibo last week and will doubtfully have the strength to overcome it today. Although the 200-hour SMA is providing support, it is unlikely to hold the losses this time, as a retest of the wedge's lower line Is expected this week.
Hourly chart
Market sentiment bullish again
Bulls now take up 59% of the market (previously 56%). The portion of buy orders, however, dropped 14 percentage points to 58%.
OANDA and SAXO Group now have a similar, yet different outlooks towards the GBP/USD. At OANDA 53% of traders are holding long positions and the remaining 47% - short. Meanwhile, the share of bulls at SAXO Group is taking up 44% of the market, down from 45% last Friday.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.54 in three months
The majority of votes shifted to the bearish, as most of the survey participants (70%) believe the GBP/USD is going to cost 1.54 or less US dollars in three months. The most popular price interval is the 1.48-1.50, chosen by less than a quarter (23%) of the voters, while the second choice in popularity implies that the Sterling will cost less than 1.44 dollars in three months, chosen by 14% of survey participants. Meanwhile, the mean forecast for Mar 07 is 1.5106.