- Buy commands now account for 53% of the market
- The share of bulls remains unchanged at 47%
- 13% of traders assume the Sterling will cost between 1.42 and 1.44 dollars in three months
- The nearest resistance, represented by the weekly R2 and the Bollinger band, is located around 1.5770, whereas the monthly R1 acts as the closest support at 1.5712
- Upcoming events: US PPI and Core PPI, US Jobless Claims
Although the Cable appreciated yesterday, Sterling suffered losses against other major peers. A 1.22% fall was registered against the Aussie, following with 1.16% decline versus the Kiwi. Lesser losses of 0.88% and 0.77% were detected against the Swissie and the Euro, respectively. The British Pound remained relatively unchanged against the Yen (-0.13%) and the Loonie (-0.04%), whereas it gained 0.47% versus the Greenback.
UK manufacturing production rose more than expected in March, while industrial output also overshot economists' forecasts. According to the Office for National Statistics, manufacturing production climbed by a seasonally adjusted 0.4% in the reported month, beating expectations for a rise of 0.3% and following an upwardly revised 0.5% gain in the preceding month. Measured on an annualized basis, manufacturing output edged higher 1.1%, topping estimates for a 1.0% gain, after increasing at a rate of 1.2% in February. The report also showed British industrial production rose the most since September as oil and gas extraction soared and manufacturing increased for a second month. Output gained 0.5% in March from the previous month, whereas economists expected no change. In the beginning of the year, industrial output was revised to show a 0.1% increase from a 0.1% decline, though the ONS acknowledged the effect on GDP would be limited. Oil and gas extraction soared 4.9%, the most since February last year. From a year earlier, industrial output climbed 0.7%.
Meanwhile, the NIESR estimated UK gross domestic product rose 0.4% in the three months through April, following the 0.3% increase in the March quarter. NIESR expects that a softening of GDP growth in the first quarter was temporary and the economy should expand by 2.5% for the year as a whole.
Jamie Jemmeson, head of trading at Global Reach Partners, gave his prospects on the effect the elections might have on the British currency: "I think that generally in terms of you looking at Sterling volatility, a Tory Government would be more positive for the Pound." He still mentioned that "Generally, if you look at historically how the Pound has re-answered, it prefers a Tory Government."
US PPI and Jobless Claims
There is no upcoming data concerning UK economy today, but the US PPI is likely to drop, while the number of people claiming unemployment insurance is expected to increase. Both events are to have significant impact on the US Dollar and both are expected to show worsened figures; hence, we should expect the Cable to rise.
Ross Walker, economist at Royal Bank of Scotland Group, shared his view on the short-term forecast for the Cable. He mentioned that GBP/USD has a moderate sell-off and that it could be down to high 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross also mentioned that "the main driver in many ways, as well as the main support in recent times have been the expectations that the Bank of England will raise interest rates at some point next year, probably the beginning 2016."
GBP/USD gives 1.58 another shot
The Cable climbed up the ladder for the third consecutive day this week. Although the GBP/USD pair stretched out to the weekly R2, 1.58 level could not be reached, forcing the pair to settle at 1.5731. On Thursday, the Sterling is likely to edge up again and reach 1.58, with the Bollinger band and weekly R2 acting as an immediate resistance cluster. However, the rally is seen slowing down through the week, indicating on a possible rebound in the near future. Technical studies are showing mixed signs, unable to confirm either scenario.
Daily chart
Although the support trend-line was crossed yesterday, the Sterling managed to climb back up. Movement is becoming not as sharp, as bullish momentum appears to be slowing down. Nonetheless, the Cable is at a five-month high and is expected to edge up slightly more. A break to the downside is expected and, perhaps, the 2014 Nov 27 high will be the ceiling.
Hourly chart
Bears keep prevailing over bulls
The share of bulls remains unchanged at 47%, whereas the portion of purchase orders slid one percentage point. Buy commands now account for 53%.
Market sentiment of SAXO Group traders remains bearish, but with 71% of all positions short, compared to 72% yesterday. Meanwhile, OANDA traders' sentiment now has slightly more bears, as 54% of positions are short (previously 51%).
Spreads (avg, pip) / Trading volume / Volatility
13% of traders assume the Sterling will cost between 1.42 and 1.44 dollars in three months
The mean forecast for August 14 is 1.5212, although the majority of voters, 59%, still believe that the British Pound will cost more than 1.50 dollars after a three-month period. Only 13% of the survey participants expect the point to cost between 1.42 and 1.44 dollars, while the second most popular choice is the 1.56-1.58 price interval, chosen by 12% of the surveyed.
During May 11-15 time period the Dukascopy Community members assume this currency pair to slump further, since more than 63% of all votes are bearish. As predicted by traders, the GBP/USD may close around the 1.529 level this Friday.
Concerning the bearish outlook towards the Cable, a member of the community, Stix, expects a retest of the daily support area. He also mentioned that the GBP/USD pair is supported by the weekly frame, so it is not likely to suffer significant losses. Geula4x, another community member, assumes the Sterling will appreciated against the US Dollar, as the pair seems very bullish on the daily chart. Geula4x concludes that after testing a support area around 1.51, the Pound moved sharply higher and tested the resistance at 1.55. He anticipates the Cable to test this resistance level again this week and break higher towards 1.56.