- The share of sell orders edged up from 58 to 70%
- Bears take up 57% of the market
- Immediate resistance is represented by the 23.60% at 1.5185
- The weekly S1 at 15114 is now the nearest support
- 64% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events today: US Markit Manufacturing PMI, US Existing Home Sales, Fed Announcement
The Sterling sustained losses against most major peers on Friday and over the weekend, with exception versus the Euro, against which it added 0.14%. The Pound suffered the most versus the Aussie, slumping 1.23%, followed by a 0.69% drop against the Yen, 0.65% versus the Buck and 0.64% against the Kiwi. The Loonie and the Swissie struggled the most at outperforming the British currency, as they gained 0.21% and 0.14%, respectively.
British retail sales declined below forecasts in October following a strong performance in the preceding month, the Office for National Statistics reported. This was mainly driven by a sharp fall in clothing and food store sales, which dropped 1.8% and 1.3%, respectively. UK retail sales volumes fell 0.6% month-on-month in October after an increase of 1.7% in September. The figure came against analysts' forecasts of a 0.5% drop on month. Excluding auto fuel, retail sales declined 0.9% from September's growth of 1.5%, thus, being also beyond the projected 0.6% decrease. Measured on an annual basis, retail sales revealed disappointing results as well. Growth in retail sales including auto fuel dropped 3.8% in October from 6.2% in the previous month. Economists expected sales to expand by 4.5%. Excluding auto fuel, retail sales gained 3% compared with September's rise of 5.7%. Analysts' projected a 3.9% increase.
In the meantime, British manufacturers reported a decrease in new orders in the current month due to the biggest fall in export demand since January 2013. In general, the balance of total orders improved to -11% on a monthly basis in November, slightly worse than the expected -10%, however, up from October's -18%.
US Existing Home Sales, Markit Manufacturing PMI and Fed Announcement
No significant events from the UK are due today, thus, the most attention should be paid to US fundamentals, namely the Markit Manufacturing PMI and the Existing Home Sales. The Manufacturing Purchasing Managers Index (PMI) is released by the Markit Economics and captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the United States. According to the forecast the index is expected to deteriorate slightly, but mostly remaining unchanged; therefore having close to no impact on the market unless the figures surprise. The Existing Home Sales, however, should have a greater impact. The annualised number of residential buildings sold during the previous month is forecasted to be less than in the preceding month, hence, weighing on the US currency. But nonetheless, the most important even is the Fed Announcement, where information concerning the interest rate hike might be revealed.
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 return above key support
Last Friday the Sterling suffered a heavier-than-anticipated loss against the US Dollar, slumping over 100 pips, therefore, erasing all weekly gains. The 23.60% Fibo managed to stop the fall and should cause a rebound; however, trade opened under the 23.60% Fibo today, diminishing the Cable's ability to appreciate. Meanwhile, the immediate support is located at 1.5114, namely the weekly S1, but is unlikely to hold the pair from falling deeper in case of a dovish Fed statement. On the other hand, the weekly PP and 20-day SMA should prevent the GBP/USD from rising higher if bulls take over.
Daily chart
The GBP/USD breached the possible trend-line and the 200-hour SMA on Friday, with the 23.60% Fibo stopping the pair from edging lower. However, today the Cable keeps declining, with a potential support located only at 1.5026, namely the November low. However, the bullish momentum could still be regained from the 1.51 major level or even earlier.
Hourly chart
Bears still prevailing over bulls
Bears remain in the majority, taking up 57% of the market (previously 61%). The share of sell orders edged up from 58 to 70%.
Both OANDA and SAXO Group retain a bearish outlook towards the GBP/USD. At OANDA, 54% of traders are holding short positions and the remaining 46% - long. Meanwhile, the share of bears at SAXO Group is taking up 64% of the market (previously 58%).
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.54 in three months
The majority of votes shifted to the bearish, as most of the survey participants (64%) believe the GBP/USD is going to cost 1.54 or less US dollars in three months. The most popular price interval is the 1.48-1.50, chosen by exactly a quarter of the voters, while the second choice in popularity was the 1.50-1.52 price range, but selected by only 12% of participants. Meanwhile, the mean forecast for Feb 23 is 1.5268.