- The share of purchase orders increased from 56 to 60%
- 47% of traders hold long positions today (previously 45%)
- 52% of forecasts for Aug 29 are below 1.56
- Closest resistance is at 1.5366, the weekly S1
- Nearest support is at 1.5260, represented by the weekly S2
- Upcoming events today: US Preliminary GDP, US Chicago PMI
The British Pound experienced mixed performance yesterday. The Sterling appreciated against the Kiwi and the Aussie, adding 0.99% and 0.79%, respectively. Losses of 0.83% were detected against the Swissie, 0.66% versus the Euro, 0.38% versus the Loonie and only 0.25% versus the US Dollar. However, the Sterling remained relatively unchanged against the yen, declining only 0.01%.
The UK economic output rose in line with expectation in the first three months of 2015, marking the lowest growth rate since the fourth quarter of 2012. The British GDP expanded 0.3%, whereas economists had hoped that the Office for National Statistics would revise its growth estimate to 0.4%, when announcing its second reading of data. The Bank of England expects the final revision to show the nation's economy expanded 0.5% during the March quarter and believes growth will accelerate during the three months through June. Economic growth stalled due to the service sector performing worse than previously thought, as well as a widening trade deficit. Manufacturing and construction, which were slightly revised upward, failed to offset a gloomier performance of the services sector, Britain's key growth engine, which accounts for almost 80% of the economy. Trade was also a strong downside contributor to growth, as imports, particularly of oil and machinery, increased at a faster rate than exports. The data also confirmed the economy grew 2.4% over the year to the first quarter, also missing expectations of an upward revision to 2.5%. The ONS also said that UK GDP grew by 2.8% in 2014, compared with 2013.
In a separate release, the ONS said business investment on the quarter performed better than expected, surging 1.7%, which is the highest since the second quarter of 2005.
Paul Bednarczyk, head of research at 4CAST, is optimistic with respect to the world's largest economy over the coming months, saying that "we should be seeing some better US numbers coming through," which will lead the Cable to 1.54. Meanwhile, the analyst considers that "over the next three months Sterling will perform well on a trade-weighted basis," but GBP/USD is still likely to decline to 1.4850. In the longer-term perspective, Bednarczyk is also bearish, setting his 12-month forecast at 1.42, which will rather be a story of Dollar strength rather than Sterling weakness.
US Preliminary GDP
There will be no data releases concerning the UK economy today, but on Monday we can expect the UK Manufacturing PMI to have a high impact on the Cable. Nevertheless, later today at 12:30 GMT the Bureau of Economic Analysis is to release data on the Preliminary GDP in the US. This is the second GDP release. The growth is expected to drop 0.2% to -0.8%, which indicates a slowdown in economic growth. However, there is a good chance the data will be better than the forecast, thus strengthening the Greenback.
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 still in tight range between 1.52 and 1.54
On Thursday, the Cable edged down for the fourth day this week, although the fall was not as sharp as anticipated. The GBP/USD pair managed to reach the weekly S2, which caused the pair to bounce back a bit and settle at 1.5318. Although technical studies retain mixed signals in the daily timeframe, the longer periods give distinctly bullish signals, suggesting the Sterling is bound to regain the bullish momentum. Today if the Pound crosses the 1.53 area, we might see more weakness down to the 1.52 level, from which the solid rebound should occur in the future.
Daily chart
The Cable appears to be in a descending channel. The pattern has been quite clear for the past two days, as the pair suffered significant losses after touching the resistance trend-line, but regaining some momentum after touching the lower border of the channel. Today we can expect the same, the pair will bounce back from the upper border and fall all the way down, possibly to 1.52.
Hourly chart
Bears keep prevailing over bulls
Bulls keep growing in numbers, as 47% of traders hold long positions today (previously 45%), while the share of purchase orders increased from 56 to 60%.
The SAXO Bank traders' sentiment remains bearish. Only 42% of their clients hold long positions. Meanwhile, the sentiment among OANDA also weakened equally to the SAXO Bank's one, as only 42% of the positions are long.
Spreads (avg, pip) / Trading volume / Volatility
20% of traders expect the British pound to cost between 1.48 and 1.50 dollars in three months
The mean forecast for August 29 is 1.5558. However, votes are slowly shifting to the upside, as only 52% of traders now expect the Sterling to cost less than 1.56 dollars in three months. The most popular price range remains the same, 1.48-1.50, chosen by 20% of the survey participants. The second most popular choice is now between 1.60 and 1.62, selected by 14% of the surveyed.
During October 13-17 time period, Dukascopy Community members forecast the currency pair to lose value, as 60% of all votes are bearish for the current trading week.
One of the community member and, apparently, a fan of The Matrix, who goes by the nickname AgentSmith, holds a bullish outlook towards the Cable. He comments that the election results in the UK had a very positive effect on the British Pound. "I am very long on the Pound, particularly on the crosses where there is more value" – he said. His rival, aslamhammad, who will further be referred to as Mr. Anderson still has a bearish outlook towards the GBP/USD. He expects the pair to exchange lower by this Friday, as the price is currently trading near a psychological level. As a result, "if price breaks below 1.5400, I'm expecting price to continue to the downside", Mr. Anderson commented.