- There are now 60% of orders to sell the Pound
- The shares of short positions increased to 55% of the market
- The 23.60% Fibo, monthly S1 and weekly PP are preventing the pair from edging higher around 1.5185
- The bottom target is the Bollinger band at 1.5083
- 56% of traders reckon GBP/USD will be at 1.54 or higher in three months
- Upcoming events today: US Import Prices, US WholeSale Inventories, MPC Member Cunliffe Speech, FOMC Member Evans Speech
The Sterling rebounded on Monday, appreciating against most of other major currencies. Gains were rather moderate, with the highest one being only 0.52% versus the Aussie, followed by 0.42% and 0.41% gains against the Yen and the Buck. The Pound struggled to advance the most against the Loonie and the Swiss Franc, adding 0.25% against both.
The UK industrial production declined more than expected in September and the total industrial production was revised down in the third quarter. At the same time, the country's visible trade deficit narrowed beyond forecasts and manufacturing, on the other hand, rose at the fastest pace on month, the Office for National Statistics reported. The British industrial production tumbled 0.2% in the ninth month of the year, while market experts had been expecting a drop of just 0.1%. In August production was up by 0.9%.
As to UK's manufacturing output, it increased above expectations to a seasonally adjusted 0.8% in September from 0.4% in August, whose figure was revised down from 0.5%. Economists had projected the British manufacturing production to climb up by 0.4% in the previous month. Compared to a year ago, manufacturing fell 0.6%. The UK's trade in goods deficit narrowed to 9.351 billion pounds in September from August's 10.8 billion pounds. The figure was not in line with the forecasted drop of 10.6 billion pounds. The visible trade gap with the Member States of the EU expanded to 7.3 billion pounds, whereas that with non-EU Member States fell to 2.1 billion pounds.
Another quiet day before UK's Claimant Count Change
Apart from the Fed and BoE officials scheduled to speak today, Tuesday is similar to Monday in terms of fundamental events. The only significant data release is the US Import Prices, which shows the change in price of imported goods and services in the domestic market. This release is considered important because it is basically the earliest inflation data the government releases. Another possible event to consider is the Wholesale Inventories, but it tends to have little or no impact on the USD crosses at all.
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 to take another step towards down-trend
Yesterday the Cable managed to return above the 1.51 level, thus, stabilise above the September low. Although the British currency still has a lot of ground to cover between the spot price and the down-trend being retested, there are currently two clusters (around 1.5195 and 1.5340) that might prevent that from happening. The second group of levels is much stronger and is likely to be reached next week, when it will coincide with the resistance trend-line. Meanwhile, the GBP/USD is aiming for the 23.60% Fibo target, which is expected to be reached within the next two days.
Daily chart
A correction occurred yesterday, pushing the GBP/USD back above the 1.51 point. Right now the Cable is only 80 pips away from its main target, namely the 23.60% Fibo. The slow and steady correction is expected to last through today as well, as there are no significant fundamentals to force a heavy decline or a rally.
Hourly chart
Bears now prevailing over bulls
The shares of both the sell orders and short positions increased, to 60% and 55% of the market, respectively.
The distribution between the bulls and bears at OANDA barely changed over the day, as 43% of open positions are short and 57% are long. Meanwhile, the proportion of bulls at SAXO Bank slid today, with the gap between short and long positions slightly narrower. Bulls now take up 55% of the market, while bears-the remaining 45%.
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 56% of survey participants reckon that GBP/USD will be at 1.54 or higher. Judging by the results of the poll conducted in October, 15% of traders expect the Sterling to cost between 1.50 and 1.52 US dollars in the beginning of February. At the same time, 13% of the estimates are that the UK currency will be worth either somewhere between 1.56 and 1.58, or 1.58 and 1.60 US dollars in three months. The mean forecast for Feb 10 is 1.5504.