- The share of buy orders, however, inched up from 53 to 54%
- 52% of positions are long today (previously 55%)
- 18% of traders assume the Sterling will cost either between 1.50 and 1.52 or 1.60 and 1.62 dollars in three months
- The nearest resistance is located around 1.5689, the 20-day SMA
- Immediate support, represented by the weekly S1 and monthly PP, lies at 1.5597
- Upcoming events today: UK Manufacturing PMI, BoE Governor Carney Speech, BoE Financial Stability Report, US ADP Non-Farm Employment Change, US Final Manufacturing PMI and ISM Manufacturing PMI, US Construction Spending, US Crude Oil Inventories
The Sterling experienced rather good performance on Tuesday, as It appreciated against most major peers. The British Pound gained the most versus the Kiwi (1.11%), the Swissie (0.97%) and the Euro (0.70%). However, a 0.53% decline was registered against the Aussie, following with lesser ones versus the Yen (0.20%) and the Greenback (0.17%).
The British economy grew faster than previously thought in the first quarter of the year, as household's disposable income increased at the fastest annual rate since 2011. The economy expanded 0.4% in the first three months, according to the Office for National Statistics, up from an initial estimate of 0.3%. Most economists and the Bank of England expect growth to accelerate later this year. The ONS also revised up an annual growth to 2.9% from 2.5%. For 2014 as a whole, the UK economy grew 3.0%, the fastest pace since 2006. The upward revision to Britain's economic output was largely due to methodological changes in construction. Yet, the largest upward driver was household consumption, which rose 0.9% in the three months through March, marking the 15th straight quarter of positive growth. Meanwhile, quarterly growth in services output was kept unrevised at 0.4%.
A separate report showed the UK's current account deficit shrank less than expected in the first quarter. The British current account recorded a seasonally adjusted shortfall of 26.5 billion pounds in the first three months, narrowing from a deficit of 28.9 billion pounds in the previous quarter. Economists, however, had expected the current account gap to contract to 23.8 billion pounds.
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.
UK Manufacturing, US ADP Non-Farm Employment Change and ISM Manufacturing PMI
The UK Manufacturing PMI is due at 8:30 AM GMT, with improvements expected. The forecast stands at 52.5, up from 52.0, which is to boost the Sterling if data meets expectations. Furthermore, the BoE Financial Stability report later today could also have substantial effect on the British currency if the report contains unexpected news. From the US side, the most effect on the Cable should have the ADP Non-Farm Employment Change and the ISM Manufacturing PMI. Both these figures are forecasted to increase, thus, showing good signs of more economic health in the States. Since from both sides data are anticipated to be better compared to the preceding releases, whether the figures turn out to be better or worse-than-expected, will determine the faith of the GBP/USD 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 take another shot at the weekly PP
The Sterling declined versus the US Dollar on Tuesday, amid better-than-expected US fundamentals. As a result, the Cable suffered a 44-pip loss, with the 20-day SMA providing support. Nevertheless, the Pound is still likely to regain the bullish momentum today and attempt to stabilise over the weekly PP one more time. The 1.58 area remains the main target, which would give more strength for further growth once taken. Meanwhile, technical indicators keep giving bullish signals in the daily and weekly timeframes.
Daily chart
The Cable continued to consolidate yesterday, as it was unable to pierce the 200-hour SMA and the resistance trend-line. The 1.5680 level keeps providing support, therefore, condemning the GBP/USD to trade in a tight range. However, today's fundamental data is expected to have an impact on the currency pair and push it out of the current trading range in either direction.
Hourly chart
Bears prevailing over bulls
Traders' outlook towards the Cable slightly worsened, as 52% of positions are long today (previously 55%). The share of buy orders, however, inched up from 53 to 54%.
Although slightly weaker, but other market participants have a bearish outlook towards the Cable. Both SAXO Group's and OANDA's sentiments remain unchanged, with SAXO's traders holding 70% of short positions and OANDA's traders holding 54% of also short positions.
Spreads (avg, pip) / Trading volume / Volatility
18% of traders assume the Sterling will cost either between 1.50 and 1.52 or 1.60 and 1.62 dollars in three months
The survey participants have high expectations concerning the Cable, as the majority of them, namely 69%, assume the Sterling will cost more than 1.54 dollars after three months. However, the most popular choice is now divided between two price intervals, 1.50-1.52 and 1.60-1.62, both chosen by 18% of the surveyed. According to the survey conducted between June 01 and July 01, the mean forecast for October 01 is 1.5767.
At the end of the previous week, the Sterling was little changed, as uncertainty over Greece's debt negotiations sapped investor demand for the pair. This week, the Pound is seen to reach level of 1.5745, as majority of poll participants are short on the currency.
Once again we have AgentSmith, a member of the Dukascopy community, sharing his opinion on the Cable. AgentSmith is in the minority of traders, as he believes the Sterling is to outperform the Buck by the end of the week. "Currently price is overbought and could move sideways, but I am expecting the price to close around 1.6000 on this coming Friday, June 26", he said. AgentSmith's main rival for this week is geula4x, another community member, who assumes the Pound is to sustain losses. Geula4x believes that since the Cable opened the week with a big gap down and Greece has not reached an agreement with creditors, risks of Greece leaving the Euro Zone rise. "Therefore, USD bulls seem better positioned to take control this week", he added. Geula4x also believes that 1.5770 is the top price the Sterling might reach this week.