- The number of buy orders increased from 56 to 61%
- Bulls and bears reached a perfect equilibrium
- 19% of the poll participants expect the British Pound to cost between 1.60 and 1.62 dollars after a three-month period
- Immediate resistance lies in face of the Bollinger band at 1.5674
- The nearest support rests at 1.56, represented by the weekly PP
- Upcoming events today: UK Manufacturing PMI, US Core PCE Price Index, US Personal Spending & Income, US ISM Manufacturing PMI, US Construction Spending, FOMC Member Powell Speech
The British currency experienced mixed performance over Friday and the weekend. The Pound gained the most against the Loonie and the Kiwi, adding 1.04% and 0.52%, respectively. Minor gains of 0.12% were registered against both the Greenback and the Aussie, while advancing 0.09% versus the Yen and losing 0.13% versus the Euro. Furthermore, the Sterling remained completely unchanged against the Swiss Franc.
Growth of British annual sales weakened in July, despite a big surge in clothing purchases, the Confederation of British Industry reported. The CBI distributive trades survey's retail sales balance dropped for a second straight month after sliding to the lowest level in five months in May, declining to +21 in July, compared with +29 in the prior month, falling short of economists' forecasts for a modest rise to +30. The outlook for sales in August was even gloomier, with the corresponding gauge declining to a two-year low of +13 from +33. According to the latest official data, retail sales, both including and excluding fuel, decreased 0.2% between May and June. Despite the continuous quarterly growth, total retail sales volumes slowed during the April-June period to 0.7%, down from 0.9% in the first three months of the year.
The retail sector and overall domestic consumption in the UK has been considered one of the key drivers for the economy. Expectations for domestic spending in the country have been mixed recently, with some analysts warning it could weaken even further once the Bank of England starts to hike its benchmark interest rate from the record low of 0.5%, given the burden of household debt and rising house prices. A separate report showed net lending to individuals and households rose more than expected in June, reflecting increased demand for credit. The BoE said total net lending to individuals increased by 3.8 billion pounds last month, up from 3.5 billion pounds in April.
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 PMI and UK ISM Manufacturing PMI
Although a vast amount of data releases from the US side is due today, the most attention should be paid to the US ISM Manufacturing PMI and UK Manufacturing PMI. Both PMIs are expected to remain above the 50.0 mark, thus, indicating industry expansion. However, the UK PMI is forecasted to slightly improve today, while the US one is expected to show no changes in the July's release. Even if the US PMI surprises with signs of growth, focus should not be drawn away from other fundamental data, such as the US Personal Spending. The Personal Spending is forecasted to deteriorate, and along with other worse-than-expected data could weigh on the Greenback.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 trades flat prior to fundamental releases
The Cable experienced substantial volatility last Friday, which was limited by the support trend-line and the upper Bollinger band. The Sterling still managed to outperform the Greenback, as trade closed at 1.5615; thus, remaining rather far from the immediate resistance. Today's technical studies and the fundamental data suggest the GBP/USD pair is to remain unchanged. From below the Pound is supported by the weekly PP at 1.56, with a much stronger cluster located around 1.5570, while a surge towards 1.5670 is not out of the question, depending on the fundamental results.
Daily chart
Even though the British currency breached the support trend-line and even the 200-hour SMA on Friday, the Sterling still managed to regain the bullish momentum and almost reach the weekly high. Despite the trend-line breach, it should not be considered irrelevant until pierced for the second time, as it prevented the Cable from falling since the end of Friday and even caused the Pound to jump higher today.
Hourly chart
The distribution between long and short positions reached an equilibrium
Bulls and bears reached a perfect equilibrium today, while the number of buy orders increased from 56 to 61%.
Other market participants now have a different outlooks towards the GBP/USD. The SAXO Group traders' sentiment remains bearish, but worsened further, as 59% of all their positions are now short (previously 56%). At the same time, OANDA's market sentiment slightly improved, with 52% of traders being short the Sterling, compared to 53% on Friday.
Spreads (avg, pip) / Trading volume / Volatility
19% of the poll participants expect the British Pound to cost between 1.60 and 1.62 dollars after a three-month period
According to the survey conducted between July 03 and August 03, 19% of traders assume the GBP/USD currency pair will cost between 1.60 and 1.62 dollars within three months. However, the second place is taken by the 1.58-1.60 price interval, selected by 17% of the surveyed. The mean forecast for November 03, on the other hand, is 1.5674.