- The portion of commands to acquire the British currency increased from 44% to 55%
- Bulls have grown stronger than bears, as 68% of all positions are long
- 15% of traders still see the pair between 1.54 and 1.56 in three months
- Closest resistance remained unchanged at 1.5438, represented by the weekly PP, while the nearest support rests at 1.5330
- Upcoming events: UK Construction PMI, BOE Gov Carney Speech, UK Services PMI, US Fed Chair Yellen Speech, US ADP Non-Farm Employment Change, US ISM Non-Manufacturing PMI
The Sterling had mixed performance yesterday, as it added 0.26% and 0.11% versus the Kiwi and the Aussie, respectively. Nonetheless, the Pound plunged 0.47% against the Greenback and 0.32% against the Euro.
The Confederation of British Industry expected the UK economy to grow strongly in the next three months, though at a slightly slower pace compared with the same period last year. The CBI's growth indicator dropped slightly to +19 in February from +23 in the preceding month, still reflecting optimism among British companies about economic prospects in the UK.
Meanwhile, UK house prices dropped in February for the first time in five months, lowering the annual rate of increase to the lowest level since September 2013, Nationwide said. British house prices declined 0.1% in the reported month, following the 0.3% rise in January. In the three months through February, house prices climbed 0.8%, the weakest advance since the three months to May 2013. Annual house price growth slowed to 5.7%, the lowest since September 2013. Britain's housing market has been cooling since the middle of 2014, when authorities tightened mortgage lending rules. The average price of a UK home has declined back to 187,964 pounds, from the recent high of 189,306 pounds reached in August. In the manufacturing sector, meanwhile, activity rose to the highest level in seven months in February. The UK manufacturing PMI increased more than expected to 54.1 in the reported month up from 53.1 in January. This is good news for the UK Finance Minister George Osborne, who seeks voters support in the May election.
John Redford, senior FX consultant at Worldwide Currencies, talks about the one-month outlook on the GBP/USD: "According to what the reaction is after the elections in May, I think that the Dollar should ultimately spare a little bit on the firm side, it is almost as I would much rather be short ahead of 1.57 along approaching 1.50, because I think it could actually see that trading range."
UK Construction PMI is likely to plunge, Mark Carney's speech to have impact
Today the UK Construction PMI and Mark Carney's speech are to have high impact on the Sterling. The Construction PMI is supposed to slightly worsen, whereas tomorrow UK Services PMI is expected to rise.
GBP/USD sliding down
John Redford also speaks about the GBP/USD forecast after the election: "I just think potentially after the election we could see a move to 1.57, potentially 1.60, after the election, I think the general stronger Dollar thing will continue over period, and I just think Sterling, if it does drift off against the US Dollar, it will be at a slower pace, which has been the case since last year, as the Euro has fallen, Sterling has drifted, but all bit slower pace against the Dollar than the Euro."
Indeed, the GBP/USD pair declined over Monday, but not as much as expected. The Sterling lost 51 pips and found support at 1.5347, where the 20-day SMA stands, rather than closing the day near the cluster around 1.5328. Nevertheless, the Pound settled at a two-year high and further gains are expected on Tuesday. Even though short-term indicators are bearish, any losses should not last, as the daily indicator is pointing north-ish, suggesting an increase in the Sterling's value. However, it is doubtful the pair will manage to cross the weekly PP at 1.5438.
Daily chart
On the hourly chart GBP/USD has been gaining ground since the beginning of Tuesday. However, the Sterling slumped around 6 a.m. and failed to go beyond the daily PP at 1.5381. Moreover, that level forced the Pound to plunge even more, down to 1.5364, as the pair awaits for the GBP data in order to regain momentum.
Hourly chart
Bulls grow stronger
Bulls have grown stronger than bears, as 68% of all positions are long, whereas the portion of commands to acquire the British currency increased from 44% to 55%.
The sentiment among the SAXO Bank clients is moving towards an equilibrium, being that 51% of open positions are short. OANDA traders, on the other hand, still have a bullish outlook with respect to the Cable, with 60% of all positions being long.