- The percentage of orders to purchase the Sterling surged from 40 up to 61%
- 46% of open positions are long and 54% are short
- 17% of traders see GBP/USD at 1.54/1.56 in three months
- The short-term resistance trend-line is at 1.4780, while support is to be found at 1.4782/60
- Upcoming events: UK Current Account, Final GDP, US CB Consumer Confidence, Chicago PMI
The Sterling more or less retained its momentum after spectacular performance on Friday. The currency appreciated 0.80% against the Aussie and 0.40% against the Kiwi. However, this time the US Dollar managed to beat the Pound by 0.46%.
Mortgage approvals in Britain surged to their highest level in six months in February of this year, gaining value a third consecutive month in a row. The Bank of England's data is therefore suggesting that property market in the country is finally starting to regain bullish momentum, after some period of weakness. Approvals for new housing credits climbed to 61,760 last month, up from 60,707 in the preceding month. The result exceeded analysts' expectations for a rise up to 61,500. Some negative effect on a number of new mortgage approvals came from new government rules earlier last year. At the moment, it is required for banks for more detailed and deeper checks on whether potential borrowers are able to afford buying a new home. On the contrary to that, UK government launched a broader support programme for first-time home buyers, intended to support new families and hold positive momentum at the property market of the country. Now, the state will contribute as much as 25% to the first deposit payment for purchasing new property.
In the meantime, growth in consumer credit lending in Britain cooled down slightly in February. In total, the indicator advanced by 740 million pounds, less than 900 million pounds estimated by economists. Nevertheless, the pace of expansion remains optimistic, with consumer credit growing at an annual pace of 6.6%.
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."
Not usual Tuesday
This might not be your usual Tuesday, with volatility only slightly higher than on usual Monday. Considering the number and importance of today's events, one might expect exorbitant levels of turbulence. The earlier source of risk is the UK current account, coupled with the GDP growth rate. And while the difference between the exports and imports is anticipated to narrow, the economy should expand by the same 0.5%. In the afternoon the Conference Board may show improvement in consumer confidence, and this is also highly likely to elicit a response from the traders, given sensitivity of the market to the US releases lately.
David Starkey, Senior Market Analyst from Cambridge Mercantile Group, commenting on the Fed removing 'patience' from Fed's interest rate guidance, said that "Yellen lowered expectation for GDP, inflation, and as such – the trajectory of Fed rates." He noted that "in December the last economic projections were that the Fed rates would be over 1% at the end of 2015." However, the most recent data showed the Fed now only expects rates to go as high as 0.625% by the end of 2015.
GBP/USD erodes demand at 1.48
The Cable failed at 1.49 and tumbled to a lower edge of its trading range. At the moment the currency pair is underpinned by the weekly S1 and monthly S2 at 1.4782/60. However, because of waning topicality of this support area (monthly pivots will be recalculated tomorrow), the bears have a solid chance of pushing the price lower, down to 1.47, which has already proven to be a tough level to breach.
Daily chart
In the short term GBP/USD appears to be following a falling trend-line. The rallies therefore should be shallow until we get to 1.47. But if resistance at 1.4780 does not contain the bulls, there is the 200-hour SMA at 1.4865 and a less-sloped trend-line at 1.4940.
Hourly chart
No change in sentiment during Monday
The long/short ratio remains unchanged. Right now 46% of open positions are long and 54% are short. At the same time, the percentage of orders to purchase the Sterling surged from 40 up to 61%.
Exactly the same picture is observed as SAXO Bank, where 46% of traders are long and 54% are short the Pound. Meanwhile, OANDA's traders are more optimistic with respect to the UK currency, though overall the sentiment is also neutral, with 51% of client being bulls and 49% being bears.