- The share of buy orders slid from 69 to 68%
- 49% of all positions are long today
- 20% 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 Bollinger band at 1.5730
- The nearest support rests at 1.5653, represented by the weekly PP
- Upcoming events today: FOMC Member Lockhart Speech, US CB Consumer Confidence, US New Home Sales
The Sterling experienced mixed performance on Friday and over the weekend. Gains were recorded only against two, the Aussie (1.02%) and the Loonie (0.99%). The Pound also declined against the Yen, losing 1.48%, following with a 1.33% loss versus both the Euro and the Swiss Franc. Furthermore, the British currency remained relatively unchanged versus the Kiwi and the Buck, as it lost only 0.16% and 0.08%, respectively.
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.
FOMC Member Lockhart Speech and US CB Consumer Confidence
Monday is going to be a really quiet day in terms of fundamental events and data releases. The only event to influence the GBP/USD currency pair is Lockhart's speech at 19:55 PM GMT. As usual, clues concerning the Fed's monetary policy are expected during his speech, thus, volatility is also likely. This speech could help the US currency recover after harsh losses on Friday. Furthermore, tomorrow at 14:00 PM GMT the CB Consumer Confidence is to be released, which shows the survey results of households, that rated the current and future economic and business conditions. Improvements are expected, suggesting the overall situation in the US is stabilising. To back this up, the New Home Sales, which are due at the same, are also forecasted to rise, compared to the preceding release.
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 risks retreating to 1.56
The Cable's volatility to the upside was limited by the Bollinger band and weekly R1 last Friday, ultimately nullifying the rally. As a result, the GBP/USD currency pair added only one pip, diminishing its growth rate to a minimum. Consequently, the tide is expected to turn and the Sterling to decline towards the 1.5653 level, namely the weekly pivot point. A stronger cluster around 1.56 is likely to prevent any substantial losses, while we should not rule out the probability of a surge above 1.57, amid US Dollar's possible weakness after Fed official's speech today.
Daily chart
The Cable remained unchanged on Friday, but suffered some weakness on Monday. However, a newly-formed support trend-line caused the Sterling to bounce back and start recovering. If losses are contained, the Pound could reach the 1.57 level and be one step closer to retaking it.
Hourly chart
Bulls keep edging closer to equilibrium
Bulls pushed closer to the equilibrium, as 49% of all positions are long, up from 47%. The share of buy orders slid from 69 to 68%.
Other market participants have a different outlooks towards the GBP/USD. The SAXO Group bearish traders' sentiment slightly improved, as 54% their positions are now short (previously 58%). At the same time, among OANDA traders, bulls and bears reached a perfect equilibrium.
Spreads (avg, pip) / Trading volume / Volatility
20% 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 24 and August 24, 20% 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 two price intervals, 1.52-1.54 and 1.60-1.62, both selected by 11% of the voters. The mean forecast for November 24, on the other hand, is 1.5741.