- 78% of orders in the 100-pip range are to buy the Pound
- Longs are now in a majority and account for 52% of all positions
- 14% of traders see GBP/USD at 1.54/1.56 in three months
- Closest resistance is located at 1.5018, represented by the weekly R1, while nearest support rests at 1.1.4859, represented by the weekly PP
- Upcoming events: US Unemployment Claims, US Current Account, US Philly Fed Manufacturing Index, UK Public Sector Net Borrowing
The Sterling declined against most currencies, gaining only against the Yen and Greenback. The Pound lost 1.27%, 0.94%, and 0.90% versus the Swissie, Euro, and Kiwi, respectively. However, a substantial gain of 1.55% was recorded with respect to the US Dollar.
While the claimant count rate continued to decline for the 28th straight month in January, the UK unemployment rate remained unchanged at post-crisis low. Unemployment in Britain dropped 102,000 to 1.86 million in the three months through January, the Office for National Statistics reported. The number of people seeking unemployment benefits fell by 31,000, shy of analysts' expectations for a 32,500 drop. However, the jobless rate held at 5.7% in January, disappointing market prediction for a decline to 5.6%. Average weekly earnings, including bonuses, increased 1.8%, down from 2.1% growth in the preceding month. Excluding bonuses, average weekly wages climbed by 1.6%, compared with 1.7% growth recorded in December.
Meanwhile, the Bank of England saw a risk that a strong Pound could leave inflation below target for longer, according to minutes of March meeting. Diverging monetary policy trends as well as stronger UK economic growth prospects compared to the Euro zone would continue to support the British Pound in the near term. While the Pound has lost against the US Dollar recently, versus the single currency it has climbed to its highest level since the start of the financial crisis. Additionally, policy makers voted unanimously on keeping interest rates on hold at all-time low 0.5%.
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 Unemployment Claims and Philly Fed Manufacturing Index
Today the US Unemployment Claims and the Current Account are expected to worsen, while the Federal Reserve of Philadelphia is expected to release better data on the Manufacturing Index than in the previous month. The effects on the Buck are uncertain, as it depends on the actual data released, and today's movements may well be determined by yesterday's events, since there is a high probability of a correction.
GBP/USD skyrockets
The Sterling failed to meet expectations; it appreciated versus the US Dollar on Wednesday as a result of a dovish rhetoric of the FOMC. The pair got to test the resistance cluster around 1.5180, while the trading session ended at 1.4977. In spite of the rally, the technical indicators are pointing directly south, implying a forthcoming decline will erase yesterday's gains. The pair is likely to reach the 2013 low once again and close beneath it.
Daily chart
The resistance trend-line was unexpectedly breached after weak US fundamentals. GBP/USD soared over the 2013 low for the second time; however, the rally is expected to be short-lived. A correction has already begun, and the Sterling is likely to return to the 2013 low.
Hourly chart
Bulls take up a majority of the market
The perfectly neutral sentiment has been disrupted, as longs are now in a majority and account for 52% of all positions. The amount of commands to purchase the Pound soared; 78% of orders in the 100-pip range are to buy the Pound.
The SAXO Group trader's bullish sentiment improved, as 52% of all positions are long. Meanwhile, liquidity consumers at OANDA are more confident in the British currency: 57% of open positions are long.
Spreads (avg, pip) / Trading volume / Volatility
14% 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."