- The portion of orders to buy the Pound added 2% points up to 53%
- Bullish traders' sentiment remains unchanged at 65%
- Immediate resistance is represented by the weekly and monthly S1s around 1.4860
- The weekly S1 and the Bollinger band around 1.4750 are the nearest support
- 62% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events: US Pending Home Sales and US Crude Oil Inventories
The British currency's performance on Tuesday was rather grim, as it mostly declined against other major peers. The rebound in oil prices helped the commodity currencies to outperform the Sterling, with the GBP/AUD, GBP/CAD and GBP/NZD all falling 1.06%, 0.87% and 0.72%, respectively. The Cable also dropped 0.42% lower, while the Pound declined 0.36% against the Japanese Yen. However, the British Pound remained relatively unchanged against the Swiss Franc, adding 0.09%, and the Euro, adding only 0.01%.
US consumer confidence strengthened in December amid robust economic data and falling unemployment. According to the Conference Board, consumer confidence index rose to 96.5 in December, up from 96.5 in the preceding month. In September, the reading surged to the highest level since August 2007, when consumer confidence came in at 105.6. Steady growth of the world's number one economy, recent decline in the jobless rate and modest growth of retail sales influenced Americans view about the domestic economy, labour market and spending. GDP increased by an annualized 2.0% in the third quarter, beating the forecasts calling for a 1.9% clip, according to the Department of Commerce. In the previous three-month period, the economy had expanded by a much more robust 3.9%.
A separate report showed the US goods trade shortfall shrank slightly in November, as both imports and exports declined, the Commerce Department said. The trade gap narrowed 1.3% in November to $60.5 billion from a revised $61.3 billion in October. Exports of goods decreased 2% to $121 billion in November, while imports declined 1.8% to $181.5 billion, with the drop concentrated in consumer goods.
US Pending Home Sales are the only driver today
With the end of the year looming closer, less economic data releases are being scheduled during the weeks. Today there is only one event to influence the GBP/USD currency pair's performance, namely the US Pending Home Sales. The Pending Home Sales are released by the National Association of Realtors and are a leading indicator of trends of the housing market in the US. They capture residential housing contract activity of existing single-family homes. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. According to the forecast, the volume of Pending Home Sales is expected to increase; thus, if data at least meets expectations the USD then is likely to strengthen.
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 poised for more weakness
The Cable was pushed down below the 1.48 major level on Tuesday, amid a strong reading of US fundamental data. Even though trade closed at 1.4820, technical studies retain their bearish signals, suggesting the GBP/USD might edge lower for the third consecutive day. At the same time, the monthly and weekly S1s are providing resistance around 1.4860, while support is represented by the weekly S1 and the Bollinger band circa 1.4750. A return inside the falling wedge's trading range for the second time would be a positive surprise, but it would still diminish the pattern's viability.
Daily chart
The GBP/USD failed to rebound from a possible trend-line on Tuesday, as it slumped slightly below the 1.48 major level. As a result, the falling wedge pattern is now under the risk of completely becoming unviable. Nevertheless, the US fundamentals are the main driver for the pair today, while the possible rebound is likely to be capped by the 200-hour SMA around 1.4880.
Hourly chart
Bulls remain strong
Bullish traders' sentiment remains unchanged at 65%, whereas the portion of orders to buy the Pound added 2% points up to 53%.
SAXO Group and OANDA now have different perspectives towards the GBP/USD. Among SAXO Group traders the majority shifted back to the bearish side, expecting the Pound to weaken against the US Dollar, as 53% of their positions are short (previously 60%). Meanwhile, 61% of OANDA traders have a positive outlook towards the Cable, unchanged since Tuesday.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.54 in three months
The majority of votes is still on the bearish side, as most of the survey participants (62%) 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 1.44 dollars or less in three months, believed by 22% of the voters. Meanwhile, the second most popular choice is the 1.46-1.48 interval, voted for by 15% of the surveyed. At the same time, the mean forecast for Mar 30 is 1.5091.
Meanwhile, this week sentiment among Dukascopy traders has significantly changed, as now 52% of traders predict the Pound to rise in value, while last week this scenario was suggested by 43% of Community members.
Among the traders with a positive outlook towards the Cable, rokasltu commented that after the Fed increased interest rates, the USD got stronger, but not significantly. "As BoE also is expected to start tightening interest rates, I think the GBP/USD will go up," he explained.
At the same time, Williamb believes that the Sterling is to weaken versus the American Dollar at the end of this week. He said that "The recent macro data from the UK may contribute to a possible rate. Therefore, new weakness of the pair is inevitable."