- Sell orders now account for 64% of the market
- 60% of traders are short the Sterling
- 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 1.5066
- 54% of traders reckon GBP/USD will be at 1.54 or higher in three months
- Upcoming events today: UK Average Earnings Index, UK Claimant Count Change, UK Unemployment Rate
The British currency appreciated against other major peers, due to the anticipated Claimant Count Change hype. Gains were not significant, as the Sterling added only 0.32% versus the Swissie, 0.28% versus the Euro and 0.24% against the Aussie. Even though the Pound remained relatively unchanged against the Yen, the Greenback and the Kiwi, advancing 0.01%, 0.03% and 0.08%, respectively, a 0.06% decline was still registered against the Canadian Dollar.
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.
UK Claimant Count Change main driver for Wednesday
There is a bank holiday in the US today, thus, the main events to focus on are only from the UK, namely the UK Claimant Count Change and the Average Earnings Index. The Claimant Count Change is released by the Office for National Statistics and shows the change in the number of people claiming unemployment benefits. This data provides insight on the future unemployment and might influence the country's monetary policy. According to the forecast, the number of people applying for benefit sis expected to fall from 4.6K to 1.6K. At the same time, the Average Earnings Index is to be released, which shows the change in the prices of labor costs paid by businesses and the government. The Average Earnings Index is also expected to improve; if the data at least meets expectations, the Sterling crosses should strengthen.
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 tries to benefit from US bank holiday
The British Pound remained flat against the US Dollar on Tuesday, with the Cable rising only three pips higher. Nonetheless, the GBP/USD has already reached the expected target early today, namely the cluster around 1.5185. Strong UK fundamentals should boost the Sterling enough to pierce the cluster and stretch out to around 1.5250. On the other hand, in case the market movers are not in favour of the GBP, a fall beyond the immediate support is possible, with the 1.50 psychological level acting as the ground floor.
Daily chart
The Cable was calm on Tuesday, with the exchange rate barely changed over the day. The pair reached the 23.60% Fibo today, which is currently preventing the Pound from edging higher. A hike towards the 200-hour SMA is expected, but weak fundamentals might still cause the Sterling to bounce back from the 23.60% Fibo and even drop under last week's low.
Hourly chart
Bears now prevailing over bulls
Bears are dominating the market with 60% of traders being short the Sterling. The portion of sell commands gained four more percentage points. The orders now account for 64% of the market.
The distribution between the bulls and bears at OANDA barely changed over the day, as 44% of open positions are short and 56% are long. Meanwhile, the proportion of bulls at SAXO Bank slid today, with the gap between short and long positions even narrower. Bulls now take up 52% of the market, while bears-the remaining 48%.
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 54% of survey participants reckon that GBP/USD will be at 1.54 or higher. Judging by the results of the poll conducted in October, 16% of traders expect the Sterling to cost between 1.50 and 1.52 US dollars in the beginning of February. At the same time, 12% of the estimates are that the UK currency will be worth either somewhere between 1.48 and 1.50, 1.54 and 1.56, 1.56 and 1.58, or 1.58 and 1.60 US dollars in three months each. The mean forecast for Feb 11 is now 60 pips lower, at 1.5445.
Meanwhile, this week sentiment among Dukascopy traders has significantly strengthened, as now 68% of traders predict the Pound to lose value, while last week this scenario was suggested by 28% of Community members.
Among slightly less than a third of all traders expecting a positive outcome for the Cable, zumba suggests that the GBP/USD is in a wedge pattern, which may seem bullish with a first and second resistances from 1.55 to 1.56.
At the same time, Jignesh, another member of the Dukascopy Community, believes the GBP/USD has finally been pushed off a cliff. "The pair has been moving sideways lower since late June, however, momentum was lacking," he said. The fundamental events that unfolded last week, in his opinion, set the two currencies on diverging paths. Jignesh suggests 1.50 may be a potentially strong support, while the overall outlook is rather weak.