- Pending orders in 100-pip range from the current market price remains to be neutral (51% bullish / 49% bearish)
- The pair could fall in value, with the closest support at 1.5672 (weekly PP)
- An advance is also a possibility, but it should be limited by the monthly PP at 1.5756
- Upcoming events: UK Average Earnings Index, UK Claimant Count Change, US CPI, US FOMC Statement and Conference
Britain's inflation slid to the lowest level in 12 years in November as falling fuel prices pushed down transport costs, while food prices declined. The UK consumer prices dropped to 1%, down from 1.3% and compared with economists' expectations for 1.2%, the Office for National Statistics said. Oil prices have declined about 45% this year, pushing down energy costs across the globe. If inflation drops below 1% the Bank of England Governor Mark Carney would have to write a letter of explanation to the Chancellor George Osborne. The Bank of England said last month it projects inflation to slide below 1% in the next few months, and since then oil prices have plummeted further.
At the mean time, US housing starts and building permits dropped in November, but the underlying trend points to consistently improving housing market, albeit the recovery appears to be uneven. Groundbreaking declined 1.6% in November from the preceding month to a seasonally adjusted annual rate of 1.028 million units, the Commerce Department reported. October's housing starts were revised up to a pace of 1.045 million units. Meanwhile, building permits, a leading indicator of construction, dropped 5.2% to 1.035 million in November. Housing market recovery continues to be restrained by tepid wage growth, which has been far outpaced by home price gains.
UK's employment data and US CPI ahead
The UK's employment data will be measured today, it is expected that nation's employment will improve. At the mean time, there will be important data from US as well, since the newest inflation data will be released and also later on the FOMC will meet for a press conference and their statement.
GBP/USD tests monthly PP at 1.5756
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 continue to hold its positions above the 1.57 level; however, at the same time its seems to be somewhat stuck between the weekly and monthly PPs. The fact that the weekly technical studies are strongly bearish could eventually drag the Sterling lower. Nonetheless, if the currency pair breaches the monthly PP then a rally towards the weekly R2 at 1.5888 could follow.
Hourly chart
Open positions and pending orders - neutral
The distribution between the buy and sell orders is also very stable—51% and 49% respectively. 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 slide lower
Jignesh, one of the community members participating in the survey, sees the pair depreciating towards the 1.55 mark "GBP/USD has faced rejection off a downwards trend line on the 1H and continues it's bearish momentum. 1.5500 should offer decent support for the pair". However, he adds that "Wednesday's FOMC will be a big driver for the USD".
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.