- The share of buy orders dropped from 49 to 47%
- 63% of all positions are now long
- Immediate support is represented by the down-trend at 1.4885
- The weekly PP around 1.4998 is the nearest resistance
- 66% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events: UK Public Sector Net Borrowing, US Final GDP, US Existing Home Sales
The Sterling was one of the worst-performing currencies on Monday, as it declined against most major peers. The Pound lost the most against the Kiwi (0.56%) and the Euro (0.50%), with almost two times less of that versus the Aussie (0.24%). Nevertheless, the British currency remained relatively unchanged versus the Yen, the Swissie, the US Dollar and the Loonie, losing 0.09%, 0.07%, 0.07% and 0.06%, respectively.
British retail sales grew slightly less than expected in the run-up to Christmas and the outlook for January sales figures was weak, according to the Confederation of British Industry's survey. The retail sales balance climbed to +19 in December from a nine-month low of +7 in November, albeit it was below a median forecast of +21. The findings showed Black Friday shopping spree and promotions were among the main drivers, with internet sales volumes surging at their quickest pace since April. Among the sectors, food outlets reported robust sales, as did clothing shops, whereas footwear and leather sales growth fell.
According to the official data, retail sales rebounded sharply in November by 1.7%. A less volatile quarterly gauge of total sales volumes in the three months to November showed an advance of 2.1%, which was the 23rd straight month of quarterly growth, and up from a rise of 1% in the third quarter, the ONS said. British consumers have fuelled the country's economic recovery over the past two years, helped by a plunge in inflation to around zero. However, wage growth remains weak and has not recovered its levels of before the financial crisis.
UK Public Sector Net Borrowing and US GDP
Although there are not many fundamental data scheduled for Tuesday, it is still likely to have an impact on the GBP/USD currency pair. From the UK side the Public Sector Net Borrowing is due. It is the difference between spending and income for public corporations, the central and local governments. According to the forecast, the Borrowing is likely to increase, showing a higher deficit. From the US side the Final GDP or the Annualized GDP is due. The Gross Domestic Product Annualized is released by the US Bureau of Economic Analysis and shows the monetary value of all the goods, services and structures produced within a country in a given period of time. GDP Annualized is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. No changes in the GDP are expected, compared to the previous value.
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 on the edge of breaking wedge's support
The Sterling failed to rebound yesterday, as it dropped below the 1.49 level and reconfirmed the falling wedge pattern's lower trend-line. Today the GBP/USD currency pair is under increased risk of falling deeper down, as fundamental data suggests. It is uncertain whether the immediate support will be able to hold the losses at 1.4850—where the Bollinger band rests. Technical studies too suggest the pair is to edge lower; however, the possibility of a surge remains if the US GDP data disappoints, with the weekly PP at 1.4998 acting as the nearest resistance.
Daily chart
The Cable is being pressured down to the falling wedge's support line, anchored around the 1.49 major level. The down-trend could still cause a rebound, causing a rally towards 1.4950, where a possible resistance line is located. However, the GBP/USD has already made an attempt to breach the support line and, thus, risks of it getting pierced today are higher.
Hourly chart
Bulls keep growing stronger
Bulls keep retreating, with 63% of all positions now long (previously 64%). The share of buy orders also dropped today, from 49 to 47%.
SAXO Group and OANDA now have different perspectives towards the GBP/USD. Among SAXO Group traders the majority still believes the US Dollar is to outperform the Sterling, as 54% of their positions are short (previously 55%). Meanwhile, 65% of OANDA traders have a positive outlook towards the Cable, compared to 64% on Monday.
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 (66%) believe the GBP/USD is going to cost 1.54 or less US dollars in three months. According to the survey, the most popular choice was the one implying that the Sterling will cost somewhere between 1.42 and 1.44 dollars in three months, selected by 21% of the voters. Meanwhile, the second most popular choice was the 1.46-1.48 interval, voted for by 17% of the surveyed. At the same time, the mean forecast for Mar 22 is 1.5067.