- The number of buy orders added two percentage points, and now they account for 36% of all commands
- The division between market participants remains unchanged and perfectly neutral, as the long/short ratio is equal to one
- 15% of traders see GBP/USD at 1.54/1.56 in three months
- Closest resistance is located at 1.4760, represented by the monthly S2, while nearest support rests at 1.4636, the lower Bollinger band
- Upcoming events: UK Annual Budged Release, US Crude Oil Inventories, US FOMC Statement, US Federal Funds Rate, US Treasury Sec Lew Speech, US FOMC Press Conference
The Sterling performed quite poorly against its major peers, there only one registered gain. The Pound declined the most versus the Euro and the Swissie, losing 0.81% and 0.67%, respectively. Nevertheless, the British currency added 0.32% versus the Kiwi.
The BoE's decision in March to keep the benchmark interest rate intact marked six years of record low interest rate environment in Britain. Back in March 2009, the central bank decided to slash the rate to 0.5% to cushion the adverse consequences of the 2008 credit crunch. Since then, the UK economic growth has recovered to above the pre-crisis levels and the jobless rate declined sharply to the lowest level in six years at 5.7% in December last year. Moreover, unemployment is predicted to drop further by the end of this year. Yet, the BoE plans to keep the rate at ultra low level for some time to come as intensifying global deflationary forces are likely to keep UK consumer inflation at the record low at least until the end of year. Therefore, minutes from the March meeting of the Monetary Policy Committee are likely to show all the policy makers voted to maintain the policy.
On top of that, Pound's appreciation could postpone the normalization of monetary policy in Britain as its downward impact on domestic consumer price inflation could become more persistent than previously thought. The Sterling rose versus the Euro after the European Central Bank announced its full-blown quantitative easing programme. BoE policy maker Kristin Forbes admitted recently that the Pound's appreciation from early 2014 appeared stronger and faster than previously estimated.
Nicholas Ebisch, Corporate Account Manager at Caxton FX, agrees with Mark Carney's statement before the House of Lords Economic Affairs Committee that "at this point it would be foolish for the BoE to cut interest rates," since it would "add unnecessary volatility to inflation." Ebisch also mentioned that the BoE Governor's use of the word 'foolish' shows that "the MPC is firmly against the interest rate raise at this time."
US FOMC Statement and Press Conference
With the UK Average Earnings index and Unemployment rate weighing on the Pound, the only hope of a rebound are the consequences of the US FOMC meeting later today, which can either strengthen the US Dollar, or weaken it, allowing the Sterling to erase the losses.
GBP/USD fails to gain a foothold above 2013 low
The Sterling performed almost according to the forecast, as it edged down on Tuesday. The Pound dropped below the 2013 low once more and even crossed support at 1.4760. GBP/USD settled at 1.4746, and another sell-off is expected today. The technical indicators are showing bearish signs on the daily time-frame, thus enhancing the probability of a downward outcome. The closest support level lies at 1.4636, represented by the lower Bollinger band, which might shift slightly lower during the day.
Daily chart
The GBP/USD pair continues to follow the resistance trend-line, slowly edging lower each day. Yesterday the Pound fell below the 2013 low once again and there is no sign of any significant correction underway. The decline beneath the 2013 low is likely to continue until the trend-line is reached, where the Sterling may find at least some support.
Hourly chart
Sentiment perfectly neutral
The division between market participants remains unchanged and perfectly neutral, as the long/short ratio is equal to one. The number of buy orders added two percentage points, and now they account for 36% of all commands.
The SAXO Group client's sentiment is close to equilibrium, as 51% of all positions are long. The long/short ratio among OANDA's market participants is equal to one, indicating perfect equilibrium.
Spreads (avg, pip) / Trading volume / Volatility
15% of traders see GBP/USD at 1.54/1.56 in three months
Comparing to the preceding week, the sentiment on this currency pair changed more to the downside; however, the traders' votes are divided equally. Now 50% of traders predict the Sterling to lose in value, while during the last week, this scenario was supported by 31% of Dukascopy traders. The median estimate for March 20 is placed around the 1.4890 mark.
One of the survey participants, joeH, thinks that the Sterling is oversold and is located next to a good support cluster. He commented on this, saying that "if the price does not drop through support," he would expect the rate to target 1.5229; however, he also reckons that the Pound has the potential to climb even higher. On the other hand, Samurai, another survey participant, thinks that the British Pound will be pressured by the strong Greenback. He argued for this outlook by saying that "there were no relevant data coming from the UK which may affect the British Pound."