- Sell orders take up only 64% of the market
- Bears are now outnumbering the bulls by only 2% points
- Immediate resistance is represented by the 23.60% at 1.5185
- The weekly S1 at 1.5114 is the nearest support
- 66% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events today: UK Inflation Report Hearings, UK CBI Realised Sales, US Preliminary GDP, US Goods Trade Balance, US CB Consumer Confidence
The Pound was in for another day of declines, with the only exceptions being against the Kiwi and the Aussie. The largest losses were registered versus the US Dollar (0.44%), the Yen (0.44%) and the Swissie (0.43%), followed by a 0.34% and 0.30% falls versus the Euro and the Loonie, respectively. However, the Sterling managed to appreciate 0.17% against the Aussie and 0.24% versus the Kiwi on Monday.
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%.
UK Inflation Report Hearings and US Preliminary GDP
On the UK Inflation Report Hearings the BoE's governor is to testify on inflation and the overall economic outlook before the Parliament's Treasury Committee. Volatility is expected during the Hearings, with hints on the future monetary policy having the biggest impact on the Sterling crosses. Later today, the US Preliminary GDP will be released by the US Bureau of Economic Analysis. GDP shows the monetary value of all the goods, services and structures produced within a country in a given period of time. Preliminary GDP is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. However, since this is the second GDP estimate, the effect on the exchange rates might be not as substantial as expected. Nonetheless, the improvements anticipated in the CB Consumer Confidence release are likely to add to the USD strength today, or cause an opposite effect if data disappoints.
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 in quiet trade; awaits US GDP data
Although no significant level was crossed yesterday, the Cable still suffered a rather serious decline. The weekly S1 was able to keep the pair afloat, but according to technical studies—another slump is on the way. The bottom floor is estimated to be located at 1.5070, whereas the weekly S2 and the lower Bollinger band around 1.5030 should prevent any further losses. Meanwhile, a chance of the GBP/USD regaining the bullish momentum exists, creating a possibility for the Sterling to retake the 23.60% Fibo and even 1.52.
Daily chart
Even though the Sterling attempted to rebound on Monday, the 23.60% Fibo pushed the pair even deeper down, with the pair nearly reaching the 1.51 major level. The Pound remains under pressure and a breach of the mention major level could trigger a sell-off towards the Nov low at 1.5026, unless the 23.60% Fibo is retaken before that.
Hourly chart
Bears still prevailing over bulls
Bears are now outnumbering the bulls by only 2% points. At the same time, the number of buy orders increased as well, but the commands take up only 36% of the market (previously 30%).
Both OANDA and SAXO Group retain a bearish outlook towards the GBP/USD. At OANDA, 52% of traders are holding short positions and the remaining 48% - long. Meanwhile, the share of bears at SAXO Group is taking up 64% of the market, unchanged since Monday.
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 (66%) 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 24 is 1.5244.