- The share of buy orders edged up from 47 to 61%
- 68% of traders expect the GBP to outperform the USD
- Immediate support is represented by the Bollinger band at 1.4808
- The monthly S1 at 1.4868 is the nearest resistance
- 73% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events: UK Current Account, UK Final GDP, US Durable and Core Durable Goods Orders, US Core PCE Price Index, US New Home Sales, US Revised UoM Consumer Sentiment and US Crude Oil Inventories
The British Pound suffered for an extra day yesterday, as the poor Public Sector Net Borrowing data weakened the currency against most major peers. The largest losses of 1.03%, 1.02% and 0.92% were registered against the Aussie, the Kiwi and the Swissie, respectively. The Cable, however, experienced less weakness than any other Sterling cross, as it dropped 0.38% lower, mainly due to US fundamentals also disappointing yesterday.
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 GDP and US Core Durable Goods Orders
Wednesday is rich in terms of economic data releases this time, with the Final GDP and Current Account data concerning the UK. Even though the GDP is forecasted to remain flat, compared to the previous quarter, the gap between imported and exported goods and services is expected to widen and, therefore, weigh on the Sterling. Later today the Census Bureau is to release the Core Durable Goods Orders data, which is the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, excluding the transport sector. As those durable products often involve large investments they are sensitive to the US economic situation. This release is likely to have the most impact on the US Dollar, a negative impact, as a rather sharp slowdown in the orders' growth is forecasted. Furthermore, a number of data of secondary importance is also due today, which could provide additional impetus for the Greenback.
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 attempts to preserve the pattern
The Cable ignored rather weak US fundamentals yesterday, as bears took over the market after the UK Public Sector Borrowing results were published. As a result, the British Pound dropped 60 pips, thus, breaching the falling wedge's lower border, also making it the seventh slump in a row. Nevertheless, the pair might still return within the pattern's borders today if the monthly S1, now the closest resistance, is overcome. Technical studies are no longer giving bearish signals, increasing the possibility of the bullish momentum to be regained, while the weekly S1 is to hold the losses.
Daily chart
The GBP/USD currency pair breached the wedge's trend-line yesterday and edged closer to the 1.48 major level. However, the Sterling seems to have managed to begin recovering, but that does not imply the price will immediately return within the pattern's borders. In case the Pound is provided with sufficient momentum to rebound, the down-trend just above 1.49 awaits confirmation and might provide resistance.
Hourly chart
Bulls keep growing stronger
More traders expect the GBP to outperform the USD, namely 68% of them. Meanwhile, the share of buy orders edged up from 47 to 61%.
SAXO Group and OANDA now have different perspectives towards the GBP/USD. Among SAXO Group traders the majority now believes the Sterling is to outperform the US Dollar, as 52% of their positions are long (previously 46%). Meanwhile, 63% of OANDA traders have a positive outlook towards the Cable, compared to 65% on Tuesday.
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 (73%) 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 22% 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 23 is 1.4995.
In course of this working week, Dukascopy Community members forecast the GBP/USD pair to drop further, as almost 56% of all votes stay bearish.
In the majority, namely on the bullish side of the barricade, one of the Dukascopy Community members by the nickname megajorko commented that "the Cable has recently experienced a strong pressure." He also added the following: "Now I suppose it will return to the magic level of 1.5."
On the opposite side of the barricade and among the bears gereltod suggests that the pair is descending within a bearish channel. "Currently, it is hitting the bottom barrier and might pullback a little, then continue with the trend," he mentioned.