- Pending orders in 100-pip range from the current market price are strongly negative (29% bullish / 71% bearish)
- The pair is likely to fall in value, with the closest support at 1.5672 (weekly PP)
- An advance is still possible, but should be limited by the monthly PP at 1.5755
US wholesale prices were pushed down by declining gas and food costs in November, adding to signs that cheaper oil worldwide is curbing inflationary pressures. Producer price index dropped 0.2% in November, after climbing by the same amount a month earlier, according to the Labor Department. However, a core measure of producer inflation, which excludes food, energy and trade services, was flat. Measured on an annual basis, the core index climbed just 1.5%, and the annual gauge has been falling a tenth of a point each month since September. The PPI is a forerunner to the more crucial CPI data that will be released on Wednesday.
At the mean time, UK construction output unexpectedly declined sharply, even as growth in the previous months was upgraded and provided a slight boost to the British economic output in the third quarter. At the start of the final quarter of the year Britain's builders experienced an unexpected 2.2% decline in construction output in October. The drop slowed annual growth to 0.7%, the weakest level since May 2013, when Britain's housing market was starting a strong recovery, according to the Office for National Statistics. On a three-monthly basis, which strips out some of the volatility in the data, construction output growth fell 0.3%. For the whole third quarter, the data showed an upward revision from an 0.8% to a 1.6% increase.
Multiple important news from UK on Tuesday
Today we are going to see a several medium importance news from US - Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production and NAHB Housing Market Index. All of them are expected to increase from the previous release, thus a negative surprise could hurt the US Dollar. However, tomorrow many important data from UK will be released, with the UK's Bank Stress Test Results early at the morning.
GBP/USD consolidates around 1.57
Already for more than a month GBP/USD is testing the strength of the down-trend, especially its upper trend-line, that started to take its shape on July, when the pair reached a six-year high at 1.7193. The pair has left the boundaries of the down-trend; however, without a sharp advance.The pair continues to trade around the 1.57 level, since it is unable to break the monthly PP at 1.5755 and there still is a downside risk of the pair falling lower, if it fails to prolong its advance.Daily chart
The pair seems to have entered a period of consolidation; although, the question where it is going to move in the future remains wide open. The biggest obstacle for the pair to move higher is the monthly PP at 1.5755, which together with the strongly bearish weekly technical studies continue to put a downward pressure on the pair. Therefore, there is a risk of a decline towards this year's low.
Hourly chart
Open positions remain neutral, pending orders still strongly bearish
In the meantime, the share of sell orders rose to 78%. It proclaims that, if the pair appreciates, in the near-term it may be stopped by the monthly PP and is likely to be pushed to the downside by this substantial resistance level.
Although, in case the pair returns to trade in the boundaries of the down-trend then the bearish pressure may become even stronger in the foreseeable future.
Spreads (avg,pip) / Trading volume / Volatility
Community expects Pound to return to its down-trend's boundaries
Likerty, one of the community members participating in the survey, thinks that there is a bigger possibility of a continuous bearish movement by saying "judging by developments on other majors, probability for extensive bearish scenario looks more realistic". However, he adds that "strong short term volatility is highly probable in this area and bullish trend could bring Pound back for 1.59's".
Meanwhile, traders, who were asked regarding their longer-term views on GBP/USD between Nov 11 and Dec 11 expect, on average, to see the currency pair at 1.5721 by the mid-March. Though the largest portion of participants, namely 17% of them, believe the exchange rate will rebound to the 1.60/1.62 region in sixty days. Additionally, 45% of the market participants see the pair falling below the 1.56 mark.