- The number of orders to acquire the Pound remains in a minority, as 56% of all pending orders in the 100-pip range from the spot are set to sell the British currency
- Still more bulls than bears among the SWFX traders, namely 55% of them
- 16% of traders still see the pair between 1.54 and 1.56 in three months
- Closest resistance is located at 1.5438, represented by the weekly PP, while the nearest support consists of a number of important levels around 1.5330
- Upcoming events: UK Markit Manufacturing PMI, UK Consumer Credit, US Personal Income and Spending, US Markit Manufacturing PMI, US ISM Manufacturing PMI
The Sterling performed well against most majors last Friday, as it added 0.38% versus the Japanese Yen and 0.37% versus the Swiss Franc. However, the Pound slumped 0.19% against the New Zealand Dollar.
British wage growth started to accelerate and this trend will feed through to greater inflationary pressures at some point, meaning the UK central bank will have to consider raising interest rates, Monetary Policy Committee member Kristin Forbes said. Forbes also denied that the UK economy was falling into a period of deflation.
In the meantime, house prices in England and Wales advanced 6.7% over twelve months to January, marking the lowest level of price inflation since April 2014, according to data from the government's Land Registry. Yet, average prices rose between December and January by 1.3%. London remained the biggest upward catalyst, with prices soaring 12% on an annual basis. Nationwide reported that house prices in Britain continued to climb between December and January, but slowed to the lowest level in 14 months when compared to the same period last year. The UK's top property portal Rightmove said earlier the average asking price of properties had climbed 2.1% between January and February. Meanwhile according to Halifax House Price Index data, house prices in the quarter to January rose 1.9%, which was the first quarterly increase in the last six months. Looking ahead, Halifax said "house prices are predicted to increase in a range of 3 to 5% in 2015 compared with 8% last year."
Jeremy Stretch, analyst at CIBC, said with respect to the UK GDP that "the breakdown was somewhat surprising in terms of the significant acceleration in net exports that was certainly something of a surprise. I think the lack of business investment was a disappointment, or there you could argue that's partly a function of weaker oil sector investment, that may be a temporary phenomenon. And also the consumption number was a little bit lower than the expectations, but I think overall it still sets us up for a reason with positive start for the 2015."
UK Manufacturing PMI likely to rise, while the US ISM Manufacturing PMI is set to fall
Today all of the important UK data, especially the Manufacturing PMI, are expected to come out better than their previous values. Whereas, the US data are to remain unchanged or worsen, hence, possibly resulting in appreciation of GBP/USD.
GBP/USD trend uncertain after the wedge
According to Jeremy Stretch, "you can stay long Sterling for a little bit longer", but warns "to be very judicious in terms of extrapolating" the recent rally. He also reckons that "once you see a level north of probably 1.56 against the US Dollar and probably below 0.73 against the Euro it might be an opportunity to then start lightening some of the Sterling longs," because investors still have not fully priced in the elections.
At the end of last week the GBP/USD currency pair managed to rebound a bit after a sharp fall on Thursday. The Sterling encountered support at 1.5395, which prevented a deeper decline. Nevertheless, the Pound failed to go beyond the monthly R1 level, as it ended the trading day at 1.5431. Technical studies are giving mixed signals, indicating the pair is likely to rise in the shorter time frames; however, the daily time frame is suggesting a bearish outcome through Monday. Meanwhile, nearest resistance for the Sterling is located at a cluster of important levels around 1.5328.
Daily chart
The hourly chart shows that the Sterling is traded in a tight range between 1.5394 and 1.5410. Moreover, the pair keeps testing the support at 1.5391 represented by the daily S1, which is preventing the Pound from sliding lower. After several attempts to breach this support, the Sterling might actually succeed, but the slump should be short-lived, as the cross is expected to gain some ground by the end of the day.
Hourly chart
Bulls maintain positions
There are still more bulls than bears among the SWFX traders, namely 55% of them, whereas the number of orders to acquire the Pound remains in a minority, as 56% of all pending orders in the 100-pip range from the spot are set to sell the British currency.
The sentiment among the SAXO Bank clients has more bears than bulls, being that 54% of open positions are short. OANDA traders, on the other hand, have a bullish outlook with respect to the Cable, as 61% of market participants are to profit from Sterling's appreciation.