- The portion of buy orders edged higher to 74% (up from 61%)
- The share of bulls returned to its Tuesday's level of 53%
- Downward-sloping channel is not letting the pair recover above 1.5270
- Target is the Oct 13 low at 1.52
- 64% of traders reckon GBP/USD will be at 1.54 or higher in three months
- Upcoming events today: UK Net Lending to Individuals, UK Mortgage Approvals, US Advance GDP, US Jobless Claims, US Advance GDP Price Index, FOMC Member Lockhart Speech, US Pending Home Sales
The Pound posted gains against most of its major peers, with exception against the US and Canadian Dollars. Rather significant gains of 0.92% and 0.84% were registered versus the Euro and the Aussie, respectively, with the Yen allowing the Sterling to appreciate only 0.28%. However, among commodity currencies the Pound suffered a loss only against the Loonie, namely 0.83%, followed by an only 0.24% decline against the US Dollar, despite the Fed's hawkish statement.
The British economy expanded less than expected in the three months to September after the largest drop in construction in the last three years and weaker manufacturing output, according to the preliminary data by the Office of National Statistics. The UK's gross domestic product stepped up by 0.5% in the third quarter, missing analysts' forecasts of a 0.6% increase. In the second quarter of the current year, GDP grew by 0.7%. Measured on an annual basis, the UK's economic growth expanded by 2.3%, which is the lowest growth rate since July-September of 2013.
The ONS reported that output increased in the three major industrial sectors of the economy. The services sector that represents the economy's biggest share and is therefore the main driver for growth, climbed up by 0.7% quarter-on-quarter, demonstrating its strongest performance since the final quarter of 2014. As to the other two sectors, namely production and agriculture, these revealed an increase of 0.3% and 0.5%, respectively. The domestic construction industry, on the other hand, tumbled by 2.2% and was the main contributor for the decline in UK's GDP. Manufacturing output moved down by 0.3% quarter-on-quarter and has contracted for three consecutive quarters.
US Advance GDP to drive trade
The UK side offers the Net Lending to Individuals data today, being the most important one among other releases today. A slight improve is expected in the given release, suggesting that consumers are more confident in their financial positions and are eager to spend money. However, the US side brings a number of data, with the GDP data being the most important one. It is the earliest GDP estimate, thus, it tends to have the most impact on the market. A gradual growth slowdown is expected (from 3.9% to 1.6%), with any change in the figure to drive the USD-crosses accordingly. Although other data releases are due at the same time, only a few are expected to show signs of improvement, such as the Pending Home Sales, but their figures will not be sufficient to outweigh the GDP ones.
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 at the beginning 2016."
GBP/USD in limbo, awaits trade trigger
This time the monthly PP failed to keep the Cable afloat, causing a 40-pip decline over the day. The pair's immediate support is now the weekly S1 at 1.5241, while the September low remains a major point and lies out of reach at this time. At the same time, a strong resistance cluster is represented around 1.5333, where the 20-day SMA coincides with the 200-day one, but now having the monthly PP near the major level of 1.53 on the way as well. The weekly S1, however, might still cause a gradual rebound, as it rests upon the point, which caused a substantial rally two weeks ago.
Daily chart
In the lower timeframe the situation still remains bearish. Although the Cable pierced the channel's upper border yesterday, the pattern remains intact, as trade returned within the down-sloping channel. However, the resistance line weakened after such a test, thus, increasing the possibility of it being breached today as well.
Hourly chart
Sentiment close to neutral
The share of bulls returned to its Tuesday's level of 53%, whereas the portion of buy orders edged higher to 74% (up from 61%).
The distribution between the bulls and bears at OANDA experienced a slight change, 48% of open positions are long and 52% are short. On the other hand, the proportion of bulls at SAXO Bank increased once more, with the gap between short and long positions a lot narrowed. Bulls now take up 49% of the market, while bears-the remaining 51%.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.54 in three months
There appears to be no clear view in the market how the Cable is going to perform during the next three months, but 64% of survey participants reckon that GBP/USD will be at 1.54 or higher. Judging by the results of the poll conducted in October, 19% of traders expect the Sterling to cost between 1.58 and 1.60 US dollars by the end of January. At the same time, 14% of the estimates are that the UK currency will be worth only 1.46 or even less US dollars. The third most popular choice (12%) was that GBP/USD will rise to somewhere between 1.62 and 1.64. The average forecast for Jan 29 is 1.5547.
This week's Community target is 1.5360
There are slightly more bulls among the Community members than there are bears, and the average forecast for this Friday is 1.5360. According to the latest survey, a little more than 56% of respondents expect the Sterling to appreciate this week. Community member TRENDMASTER reckons that "GBP/USD may be affected positively by dovish outcome from FED FOMC meeting this week and will continue to strengthen in the near term."
On the other hand, nuonrg expects bearish development and states that "the four-hour triple top held the pair capped and price dropped lower", adding that he sees "the down channel continuing to shape the pair with bottom around 1.497 level if it overreacts to the downside".