- The share of buy orders slid ten percentage points to 54%
- Bullish SWFX traders' sentiment remains unchanged at 52%
- 15% of the poll participants expect the British Pound to cost between 1.58 and 1.60 after a three-month period
- Immediate resistance lies in face of the weekly R1 at 1.5616
- The nearest support rests around 1.5609, represented by the 55-day SMA
- Upcoming events today: UK Construction Output, US PPI, US Core PPI, US Capacity Utilization Rate, US Industrial Production, US Preliminary UoM Consumer Sentiment
The Sterling appreciated against most major peers on Thursday, but remained unchanged against the others as well. The two largest gains were detected against the Loonie and the Kiwi, adding 0.68% and 0.85%, respectively. The Pound remained relatively unchanged versus the Euro, losing 0.01%, versus the Swissie and the Greenback, adding 0.03% against both.
In June, less people in the Europe's third largest economy claimed unemployment benefits; therefore, signalling that the British job market has not completely cooled off. The number of applicants for jobless benefits decreased by 4,900 in June, compared to a revised figure of an increase of 200 in May. Moreover, the June figure was surprisingly better than the increase of 1,000, expected by economists. The UK unemployment rate, however, remained unchanged at 5.6%, which is by 0.7% lower than in the same period a year before. Meanwhile, the amount of British looking for work rose 25,000 to 1.85 million.
In the meantime, wages in the UK rose steadily on an annual basis, albeit missing economists' forecasts. Pay with bonuses grew at 2.4% in June, compared to 3.2% jump in the preceding month. The slowdown in growth was mainly attributed to the 3.3% decline in bonuses in the reported period. Despite that, the basic pay growth came in line with the expectations of 2.8%, and slightly higher than the 2.7% jump the month before. In order for the Bank of England to move towards hiking its benchmark interest rates, great attention will be paid to the labour-market indicators.
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 Construction Output, US PPI and US Preliminary UoM Consumer Sentiment
From the UK side there will be only one relevant even, namely the Construction output. The output is expected to show signs of growth and somewhat boosting the Sterling. From the US side attention should be paid to the US PPI. Although the growth is expected to slow down, chances are that the data will exceed expectations to the upside. Furthermore, the US Capacity Utilization Rate is also forecasted to grow at a slower pace of 78%, down from 78.4%. The last significant fundamental even to influence the Cable is the Preliminary UoM Consumer Sentiment, which is due at 14:00 PM GMT. Improvements are anticipated, although historical data shows diverse figures. Ultimately, the US Dollar is likely to be boosted by the fundamentals, despite some possible poor readings.
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 stuck in limbo
The Cable failed to negate the previous week's losses, as it appreciated less than anticipated. The pair lacked the strength to pierce the weekly R1, thus, the Sterling remained relatively unchanged against the Buck, adding only three pips. The British currency appears to be having trouble penetrating the weekly R1 barrier this week, therefore, a decline is likely to take place today. However, from below the GBP/USD remains supported by the 55-day SMA and the 1.56 major level, which could keep the pair unchanged if fundamental data meets expectations.
Daily chart
A new trend-line appeared on the hourly chart, which is providing support for the Cable. The trend-line helped the GBP/USD to limit the losses yesterday and regain the bullish momentum for a short while; however, risks of it being pierced persist today.
Hourly chart
Bulls barely prevailing over bears
Bullish SWFX traders' sentiment remains unchanged at 52%, whereas the share of buy orders slid ten percentage points to 54%.
Other market participants now have a different outlooks towards the GBP/USD. The SAXO Group traders' sentiment improved today, with 56% of all positions being short. At the same time, OANDA's market sentiment slightly worsened, with 54% of their traders holding short positions, compared to 53% previously.
Spreads (avg, pip) / Trading volume / Volatility
15% of the poll participants expect the British Pound to cost between 1.58 and 1.60 dollars after a three-month period
According to the survey conducted between July 14 and August 14, 15% of traders assume the GBP/USD currency pair will cost either between 1.58 and 1.60 dollars within three months. However, the second place shifted to the 1.60-1.62 price interval, selected by only 13% of the voters. The mean forecast for November 14, on the other hand, is 1.5703.
This week the sentiment changed a little, as the bullish mood still persists. The average forecast for the end of the current week went down, namely to 1.559 mark.
Although the sentiment remains bullish, the gap is now not that wide. Williamb, one of the Dukascopy poll participants, said that the Bank of England seems to be more aggressive than the Fed in terms of their interest rate decision. That was the main reason why he has a bullish perspective towards the GPB/USD. However, Nacerdz, another member of the Dukascopy community, expects the US Dollar to outperform the Pound by the end of the week. "My vision is bearish based on the technical analysis tools", he mentioned.