- Purchase orders now take up only 45% of the market
- Open positions broke out of the equilibrium, with 51% of them now being short
- 19% of traders assume the Sterling will cost between 1.50 and 1.52 dollars in three months
- The nearest resistance is located around 1.5762, the weekly PP
- Immediate support, represented by the monthly R1, lies at 1.5703
- Upcoming events today: UK CBI Realized Sales, US Unemployment Claims, US Core PCE Price Index, US Personal Income and Spending, US Natural Gas Storage
The Sterling experienced mixed performance for the fourth day in a row. Gains of 0.29% were detected only against both the Loonie and the Aussie. The British Pound declined the most versus the Kiwi, 0.67%, and versus the Euro, 0.48%. Lesser losses of 0.22%, 0.20% and 0.15% were recorded against the Yen, the Swiss Franc and the US Dollar, respectively.
The US economy contracted in the first quarter less than previously estimated as it struggled with bad weather, a strong US Dollar, spending cuts in the energy sector and disruptions at West Coast ports. The American gross domestic product declined at a 0.2% annualized rate, compared with the 0.7% drop reported previously, according to revised data from the Commerce Department. The data bolstered Fed's projections that the setback was temporary. The US growth was supported by robust consumer spending, which accounts for more than two thirds of US economic output. Consumer spending increased 2.1% in the reported period, up from 1.8% estimated earlier. Thanks to this upward revision, the GDP growth rate received a boost of 20 basis points. Yet, household consumption decelerated sharply after soaring 4.4% in the final quarter of last year. In addition to consumer spending, gains in inventories and home building, and a smaller decline in non-residential structures also helped boost GDP in the first quarter. While export growth was revised higher, that was offset by an upward revision to imports, leaving a still-large deficit that deducted almost 2 percentage points from GDP.
The first estimate of second-quarter GDP is scheduled for July 30. The economy is likely to expand at a 2.5% rate from April through June and average 3% growth in the last half of the year, according to the median projection of economists.
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 be a story of Dollar strength rather than Sterling weakness.
US Jobless Claims
From the UK side we only have the CBI Realized Sales data release today, with an expectation of a serious disappointment. Nonetheless, the largest impact on the Cable today should have the US Unemployment Claims. The number of people applying for unemployment benefits is expected to increase, and due to US GDP showing contraction in the country's economy, there is a solid chance we will see a worse figure compared to the previous one. Furthermore, the US Personal Spending and Income, both are expected to rise, but it is uncertain whether these data releases can overshadow the Jobless Claims; thus, the GBP/USD is still likely to rise today.Ross Walker, economist at Royal Bank of Scotland Group, suspects that GBP/USD may descend to 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross 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 to rebound from 1.57
After experiencing some volatility, the Cable sustained minor losses. The pair stabilised near the 1.57 level, just in front of the monthly R1, as was anticipated. Today technical studies retain their distinctly bullish signals, but a rally is actually expected, unlike on Wednesday. The closest resistance is still located at 1.5762, represented by the weekly pivot point, but the 1.58 major level provides stronger resistance, as it prevented the climb yesterday and even pushed the Sterling down.
Daily chart
Even though the Cable found support at the 200-hour SMA on Tuesday, it still failed to pierce the 1.58 major level. As a result, the Sterling was pushed so hard, it breached the SMA all the way down to 1.5680. The pair is expected to appreciate today and reclaim the area above the 200-hour SMA.
Hourly chart
Bears now prevailing over bulls
Open positions broke out of the equilibrium, with 51% of them now being short. Meanwhile, the number of purchase orders declined nine percentage points. The commands now take up only 45% of the market.
Although slightly weaker, but other market participants have a bearish outlook towards the Cable. The SAXO Group's clients have 71% of short positions, compared to 72% yesterday. Meanwhile the bearish market sentiment of OANDA shifted from 57 to 62%.
Spreads (avg, pip) / Trading volume / Volatility
19% of traders assume the Sterling will cost between 1.50 and 1.52 dollars in three months
The survey participants have high expectations concerning the Cable, as the majority of them, namely 60%, assume the Sterling will cost more than 1.54 dollars after three months. However, the most popular price interval shifted to between 1.50 and 1.52 dollars, while the second place is now taken by the 1.60-1.62 price range. According to the survey conducted between May 25 and June 25, the mean forecast for September 24 is 1.5621.
Currently, the pair is still trading in the bullish channel, while traders' forecasts divided equally. Speaking about the next week, the average expectation of the Community members went down to around 1.585.
This week aslamhammad, one of the community members, now has a bullish outlook towards the Sterling. He said that "currently the price is overbought and could move sideways, but I am expecting the price to close around 1.60 on this coming Friday, June 26." On the bearish side we have rokasltu, another Dukascopy trader. In his opinion the GBP/USD will come to levels near 1.55 mark, as interest rates for USD will be hiked.