- buy orders now take up 69% of the market
- Only 47% of all positions are long today
- 18% 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 and Bollinger band at 1.5719
- The nearest support rests around 1.56, represented by the 20 and 55-day SMAs
- Upcoming events today: UK Public Sector Net Borrowing, US Markit Manufacturing PMI
The British Pound declined against most major peers on Thursday, with exception against the Aussie and the Buck. The Sterling lost 1% versus Euro and 0.65% versus the Swissie, following with a 0.35% decline against the Yen and 0.32% against both the Loonie and the Kiwi. Nevertheless, the Pound added 0.32% against the Aussie, while remaining relatively unchanged against the Greenback, adding only 0.04%.
UK retail sales increased in July, with low inflation and faster wage growth supporting consumer spending. Moreover, a recent rise in the Pound's value and a renewed drop in global oil prices have further helped consumers. The volumes of sales excluding fuel climbed 0.4% last month, according to the Office for National Statistics. From a year earlier, core retail sales surged 4.3% in the reported month. Including fuel, however, retail sales inched up 0.1% from June, while measured on an annual basis the gauge increased 4.2%, marking the 28th annual gain. The UK economy, which weakened in the first quarter of the year, relies heavily on consumer demand for robust growth. On top of that, the amount spent rose 1% in July compared with the previous year, but fell 0.2% from a month earlier.
A separate report showed total factory orders rose in August, while exports to European and overseas markets continue to falter due to a strong Pound. The overall balance of orders within the British manufacturing sector climbed in August to -1%, up from -10% in the prior month, according to the Confederation of British Industries. The report also suggested that manufacturing output is likely to keep its pace in the upcoming quarter, while export orders were subdued in August.
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 Public Sector Net Borrowing and US Markit Manufacturing PMI
The only to significant events concerning the Cable today are the UK Public Sector Net Borrowing and the US Marking Manufacturing PMI. The Net Borrowing, which is the value between spending and income among public corporations and governments, is forecasted to show drastic improvements. The estimated improvement stands at -2.4£ billion, down from 8.6£ billion previously; a negative number indicates budged surplus. Later today at 13:45 PM GMT, Markit is to release the US Flash Manufacturing PMI data. A slight improvement is anticipated, although according to historical data, figures have a solid chance to fail meet expectations. As a result, the fundamental data should boost the Cable.
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 takes another crack at 1.57
Even though the Cable experienced substantial volatility to the downside, the pair managed to regain the bullish momentum after reaching the support cluster around 1.56. However, gains were limited by the upper Bollinger band, as the GBP/USD added only six pips over the day. Today the Sterling is to attempt and retake the 1.57 major level once again, but even if it succeeds, the resistance cluster at 157.19, namely the weekly R1 and the Bollinger band are likely to prevent the Pound from edging higher.
Daily chart
Although poor UK Retail Sales data pushed the Cable down, it rebounded after reaching the 200-hour SMA at 1.5615. However, the 1.57 barrier, a six-week high, remains strong and the GBP/USD might struggle breaching it today; tides could even be turned if the fundamental data worsens.
Hourly chart
Net positions equally divided between long and short ones
Bulls and bears broke out of the equilibrium, as only 47% of all positions are long today. The number of buy orders, however, gained six percentage points, now taking up 69% of the market.
Other market participants have a different outlooks towards the GBP/USD. The SAXO Group bearish traders' sentiment remains unchanged at 58% for the third day in a row. At the same time, among OANDA traders bulls keep pushing closer towards equilibrium, as only 51% of all positions are short today (previously 53%).
Spreads (avg, pip) / Trading volume / Volatility
18% 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 21 and August 21, 18% of traders assume the GBP/USD currency pair will cost between 1.58 and 1.60 dollars within three months. However, the second place is now taken by the 1.52-1.54 price interval, selected by 13% of the voters. The mean forecast for November 21, on the other hand, is 1.5696.
Dukascopy Community members are mostly bullish on the pair, as more than 54% of respondents believe the pair will appreciate this week. The consensus forecast stands at 1.5612.
The sentiment is rather close to being neutral, as traders are almost equally divided between bulls and bears. Student_21, a traders with a bullish outlook towards the Cable, says that the Pound has potential and needs to see how much the resistance at 1.5950 could withstand. However, "it is a very strong resistance", he added. At the same time, Jignesh, another Dukascopy Community member, expects the Sterling to weaken against the Greenback. Jignesh believes the bears and bulls have been fighting within a certain area for a few weeks now, "but the ever so important technical resistance at 1.5655 has yet to be taken out on the 4 Hour chart, and until it does the pair's downside potential remains greater."