- The number of sell orders increased from 55 to 59%
- 52% of all open positions are now short
- Main resistance is the weekly R1 and the Bollinger band around 1.4515
- The nearest support is now the monthly R1 point at 1.4446
- 57% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: FOMC Members Dudley, Rosengren and Bullard Speeches, US Preliminary UoM Consumer Sentiment, US Existing Home Sales
On the hawkish BoE's stance the Sterling appreciated against most of other major currencies on Thursday, with exception against the New Zealand Dollar. The largest rally was registered against the US Dollar, namely 1.56%, being that the Buck retained its post-FOMC weakness. Mild gains of 0.50%, 0.61%, 0.63% and 0.68% were detected against the Yen, the Swissie, the Loonie and the Euro, respectively, whereas the Pound added only 0.29% versus the Aussie. Against the third commodity currency, however, the GBP suffered a 0.33% decline.
The Bank of England's nine-member rate-setting committee voted unanimously to keep interest rates on hold at 0.5% and the size of its bond portfolio at 375 billion pounds. It was the second month in a row policy makers were unequivocal on the decision, after Ian McCaffery, an external member of the Monetary Policy Committee, abandoned his rate hike vote in February referring to a weaker outlook for wages. Despite an increased level of uncertainty and sluggish global demand, policy makers said interest rates were likely to rise rather than decrease in the future to ensure inflation returns to its official target of 2% "in a sustainable fashion," according to the Monetary Policy Committee minutes.
On top of that, the BoE voiced a fresh warning about the Britain's upcoming referendum on membership of the European Union, saying that uncertainty over the outcome may result in slowing the economy in the months ahead of the vote. The central bank said the upcoming vote on June 23 could delay some spending decisions, though it said recent data suggested growth would keep the same momentum this quarter as it had at the end of last year. The BoE's statement marks the first time that officials have explicitly expressed their concern that the looming referendum risks acting as a further drag on growth amid an already challenging global environment.
Preliminary UoM Consumer Sentiment is the only relevant event today
Friday is not rich on economic data releases, with only the US Preliminary UoM Consumer Sentiment due. The Preliminary UoM Consumer Sentiment is released by the Reuters/University of Michigan and is a survey of personal consumer confidence in economic activity. It shows a picture of whether or not consumers are willing to spend money. Apart from this release, several FOMC members are scheduled to speak today. Their speeches are likely to cause volatility in the Cable specifically.
GBP/USD struggles to retake 1.45
On Thursday the Sterling skyrocketed against the US Dollar, meeting resistance only at the third target, namely weekly R1 at 1.4510. However, the Cable closed below the 1.45 major level and is likely to struggle to pierce it again today, as the weekly R1 and the Bollinger band still form a rather strong resistance area around 1.4515. Technical indicators, on the other hand, insist that the immediate resistance is to be pierced. A breach is possible if demand at 1.4446, represented by the monthly R1, is sufficient to cause a rebound, but due to lack of impetus, is unlikely to occur.
Daily chart
Even though the ascending channel pattern was broken, the pair might now be trading in a broadening rising wedge one. There is still room for a rally towards the resistance line, but the Cable appears to have lost momentum and now risks falling towards the 200-hour SMA around 1.4265, a breach of which is to trigger a sharper sell-off, with the new insufficiently confirmed trend-line acting as a support above 1.41.
Hourly chart
Sentiment turns bearish
Market sentiment shifted to the bearish side, as 52% of all open positions are now short, compared to 40% yesterday. The number of sell orders also increased, from 55 to 59%.
A similar but to a lesser extent attitude is observed at OANDA, where 54% of open positions are long, tw percentage points less than yesterday. On the other hand, SAXO Bank traders edged back closer to equilibrium, being that 49% of positions are long and 51% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (57%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The most popular price interval was selected by 19% of the voters, namely the 1.34-1.36 one, while the second most popular choice implies that the Pound is to cost between 1.48 and 1.50 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for June 18 is 1.4233.
Concerning the Community Forecasts, the pair is expected to continue moving sideways this week, as consensus forecast stands for 1.423, just 3 pips below the daily pivot. Additionally, almost equal number of participants is having a bullish and bearish outlook on the pair, while market sentiment is slightly bearish.
On the bullish side of the barricade Jignesh believes that the USD is once again under pressure, and bulls area finding value in the GBP/USD as it trades in the multi decade support zone. "Dips below 1.40 are considered value buys for swing traders and for that reason this pair is well supported. Overhead resistance comes in at 1.4650 - 1.4700. As the pair remains in a longer term down trend and risks of Brexit have not yet subdued", he added.
At the same time, a trader with a bearish outlook, bakafx, suggests that "the bullish reaction on GBP/USD has limit in fundamental study so I am expecting new bearish leg with price between 200 MA on 4H at 1,4269 and WP at 1,4309."