- The share of sell orders added an extra 2% points up to 61%
- 56% of all positions are short and the remaining 44% are long
- The group of levels around 1.5320 are preventing the pair from edging higher
- The bottom target is the cluster around 1.5185
- 56% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events today: US Empire State Manufacturing Index, UK CPI, PPI, RPI, HPI, US CPI and Core CPI, US Capacity Utilization Rate
The Pound held gains against most major peers for another day on Friday and even the weekend. The largest gain of 0.62% was recorded against the Swiss Franc, followed by a 0.43% one versus the Euro and 0.27% against the Loonie. Other Sterling crosses remained relatively unchanged, as the British currency gained 0.05% against the Kiwi and 0.04% against the Aussie, while also appreciating 0.03% versus both the Yen and the US Dollar.
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.
Another uneventful Monday
Another quiet Monday is in store for us today, with the only event to influence the GBP/USD being the US Empire State Manufacturing Index. Even though the index is expected to improve, the figure is still likely to remain below 0, thus, indicating worsening conditions overall. Nevertheless, on Tuesday a number of inflationary reports are due both from the UK and the US. Those reports are expected to cause volatility and be the main drivers tomorrow.
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 refuses to fall under 1.52
After testing the 23.60% Fibo, the GBP/USD recovered from intraday losses due to disappointing US fundamentals. Although the pair remained relatively unchanged over the day, a correction is expected to take place today. The 23.60% Fibo, monthly S1 and weekly PP continue to form the support cluster around 1.5185, but the 1.52 psychological level might also contribute to holding the dips today. Meanwhile, technical studies are giving distinctly bearish signals, bolstering the possibility of the negative outcome.
Daily chart
The Cable managed to regain the bounce back from the up-trend, but pierced it today after edging lower over the weekend. The 200-hour SMA also inched down, now providing support near the 1.52 major level, which should hold the losses if the Sterling fails to recover and preserve the trend-line.
Hourly chart
Bears still prevailing over bulls
The gap between the bulls and the bears narrowed, as 56% of all positions are short and the remaining 44% are long. At the same time, the share of sell orders added an extra 2% points, up to 61%.
The distribution between the bulls and bears at OANDA slightly changed since Friday, as 55% of open positions are short and 45% are long. Meanwhile, the proportion of bulls at SAXO Bank failed to remain in the majority, but with the gap between short and long positions still being rather narrow. Bulls now take up 45% of the market, while bears-the remaining 55%.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 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 lower. Judging by the results of the poll conducted in October, 18% of traders expect the Sterling to cost between 1.48 and 1.50 US dollars in the middle of February. At the same time, 14% 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 16 at 1.5368.