- The number of purchase orders declined from 74 to 26%
- Positions are equally divided between the long and the short ones.
- The 20 and 200-day SMAs are preventing the pair from edging higher
- The bottom target is the monthly PP at 1.5297
- 66% of traders reckon GBP/USD will be at 1.54 or higher in three months
- Upcoming events today: US Employment Cost Index, US Core PCE Price Index, US Personal Spending and Income, US Chicago PMI, US Revised UoM Consumer Sentiment and Inflation Expectations, FOMC Member Williams Speech
The British Pound managed to appreciate against most major peers, with exception against the Swiss Franc and the Euro. The Aussie suffered the most, declining 0.89% against the Sterling. The British currency posted lesser gains against the Kiwi, the Yen, the Buck and the Loonie, but losses of 0.17% were registered against both the Euro and the Swissie.
UK house price growth accelerated in October, adding to signs of renewed momentum in the housing market. House prices climbed by 0.6% this month after the 0.5% increase in September. Measured on a yearly basis, the reading rose 3.9% in October, up from the 3.8% annual gain in September. According to Nationwide, house prices had risen at an annual 3% to 4% over the past five months, which boded well for a solid increase in housing market activity. Meanwhile, the number of mortgages approved for house purchases declined slightly in September, the Bank of England's data showed. The total fell from 70,664 in August to 68,874 in September, but this was higher than the average of the previous six months of 66,900.
A separate report showed retail sales volumes declined in October after a surge last month. The overall balance of UK retail sales slowed to +19% over the year to October, down from 49% in September and notably below expectations, data from the Confederation of British Industries. Nevertheless, the outlook for sales remained resilient due to low inflation, increasing wages and looming Christmas shopping season.
US Employment Cost Change
With no significant events from the UK scheduled for Friday, all attention should be directed to the US fundamentals. A number of events are due today, with the most important one being the Employment Cost Index; it shows the change in price business and the government pay for civilian labor and provides insight on consumer inflation. According to the forecast, the Employment Cost Index is expected to increased, thus strengthening the US currency. On the other hand, the Personal Income and Spending are both expected to worsen. Mixed data is likely to provide volatility to US crosses, but ultimately, the number of positive releases should outweigh the number of negative 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 attempts to close the week above 1.53
Poor US GDP data weighed on the Greenback yesterday, helping the Cable recover from Wednesday's losses. The 1.53 major level is now the immediate support, also bolstered by the monthly PP. If breached, the weekly S1 is likely to take action for the last time this week, holding the losses. Meanwhile, the 20 and 200-day SMAs are providing resistance around 1.5340; unless the US fundamentals disappoint again today, gains should be capped by this area. The 55-day SMA is the next target at 1.5380, reinforced by the weekly PP.
Daily chart
The resistance trend-line was eventually pierced yesterday, allowing the Cable to negate Wednesday's losses. Although the pair remains trade above the 1.53 major level, risks of edging lower persist, as the GBP/USD approaches the 200-hour SMA, which could turn the tables around.
Hourly chart
Neutral sentiment
Positions are equally divided between the long and the short ones. At the same time, the number of purchase orders experienced a significant decline, from 74 to 26%.
The distribution between the bulls and bears at OANDA switched places, 52% of open positions are long and 48% are short. On the other hand, the proportion of bears at SAXO Bank increased once more, with the gap between short and long positions slightly wider. Bulls now take up 46% of the market, while bears-the remaining 54%.
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 66% of survey participants reckon that GBP/USD will be at 1.54 or higher. Judging by the results of the poll conducted in October, 20% of traders expect the Sterling to cost between 1.58 and 1.60 US dollars by the end of January. At the same time, 13% of the estimates are that the UK currency will be worth either between 1.62 and 1.64 US dollars in three months or less than 1.46. The third most popular choice (11%) was that GBP/USD will rise to somewhere between 1.56 and 1.58. The average forecast for Jan 30 is 1.5576.
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".