- The share of buy orders improved from 36 to 47%
- 61% of all positions are short
- The group of levels around 1.5340 are preventing the pair from edging higher
- The bottom target is cluster around 1.5185
- 51% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events today: US Jobless Claims, Fed Chair Yellen Speech, US JOLTS Job Openings, US Crude Oil Inventories, FOMC Members Evans, Dudley and Fischer Speeches, MPC Member Haldane Speech
The Sterling strengthened against other major currencies on Wednesday, boosted by lower unemployment rate. The most notable gain was detected against the US Dollar, namely 0.62%, followed by a 0.52% gain against the Loonie, 0.45% and 0.44% versus the Swissie and the Euro, respectively. The Pound struggled the most to appreciate against other commodity currencies – the Aussie and the Kiwi, adding only 0.19% and 0.16%, respectively.
The UK unemployment rate dropped to the lowest level in seven years in the third quarter, extending an improvement in the labour market, the Office for National Statistics reported. The jobless rate declined to 5.3%, whereas economists had expected the rate to remain unchanged at 5.3%. However, the claimant count increased for the third consecutive month, up by 3,300 in October to 795,500. Despite the improvement in the headline numbers, the report also showed some weakening in the pace of wage growth. Earnings excluding bonuses climbed an annual 2.5% in the reported period, down from 2.8% in the previous three months and missing expectations for a reading of 2.6%. Total pay rose 3%, due to a 15% surge in bonuses.
The BoE's November Inflation Report showed labour demand growth had remained robust, and both wage and productivity growth had picked up since last year, but remained below pre-crisis rates. The new forecasts also showed the central bank saw the unemployment rate falling further to 5.3% in the fourth quarter of this year, then remain around that level throughout next year, before sliding slightly to 5.2% in Q4 2016.
US JOLTS Job Openings, Janet Yellen's Speech
The tables have turned, as no significant fundamentals from the UK are due today. However, a number of events from the US are to be focused on, such as the US JOLTS Job Openings. It shows the number of job openings during the reported month with exception of the farming industry. Despite its late release, the Job Openings could still have a significant impact on the market, as it is a leading indicators of overall employment. According to the forecast, the number of jobs is expected to increase, while the number of people applying for unemployment benefits is forecasted to decrease; therefore, the Buck is also likely to strengthen. However, the main event is still the Fed Chair's Speech, since the head of the central bank has direct influence on the interest rates. Volatility during Yellen's speech is likely to take place, while any hints concerning future monetary policy are likely to set the according trading mood.
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 remain in the green zone
Due to some disappointments in UK's fundamentals yesterday, the Cable failed at reaching its target of 1.5250, but managed to breach the immediate resistance, nonetheless. Another rally today is possible, but with gains limited by the 1.53 major level, as a strong supply area lies just beyond it. At the same time, risks of edging lower persist, as technical studies both in the daily and the weekly timeframes retain their bearish signals. Dips should be limited by the weekly PP, 23.60% Fibo and the monthly S1, unless the US data provides enough impetus for the exchange rate to return lower.
Daily chart
The GBP/USD appears to be in an up-trend, although further confirmation of the support line is required to be certain. The par has been bouncing off the trend-line for three days, with the exchange rate edging significantly higher on Wednesday. The support trend-line is expected to hold the losses today, causing a rebound with the help of the 23.60% Fibo, thus, confirming the up-trend.
Hourly chart
Bears still prevailing over bulls
Market sentiment worsened again, now with 61% of all positions being short; while the share of buy orders improved from 36 to 47%.
The distribution between the bulls and bears at OANDA barely changed places, as 52% of open positions are short and 48% are long. Meanwhile, the proportion of bulls at SAXO Bank remained unchanged today, with the gap between short and long positions still being rather narrow. 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 51% of survey participants reckon that GBP/USD will be at 1.54 or lower. Judging by the results of the poll conducted in October, 15% of traders expect the Sterling to cost between 1.48 and 1.50 US dollars in the beginning of February. At the same time, 13% of the estimates are that the UK currency will be worth somewhere between 1.50 and 1.52 US dollars in three months. The mean forecast for Feb 12 at 1.5391.
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.