- 43% of all commands are to buy the Pound
- 52% of all positions are long
- Immediate resistance is represented by the weekly S1 at 1.5115
- The weekly S2 at 1.5043 is the nearest support
- 66% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events today: UK Autumn Forecast Statement, US Durable and Core Durable Goods Orders, US Jobless Claims, US Core PCE Price Index, US Personal Spending and Income, US Markit Services PMI, US New Home Sales, US Crude Oil Inventories
The British Pound sustained losses against other major currencies on Tuesday. The Sterling suffered the most versus the commodity currencies, falling 1.15% against the Aussie, 0.79% against the Kiwi and 0.70% versus the Loonie. The Cable, however, dropped only 0.26%, despite the US fundamentals beating expectations yesterday.
Testifying before a treasury select committee, Bank of England Governor Mark Carney reiterated that the current, record-low interest rates in Britain are likely to continue "for some time", explicitly signalling that the central bank is in no hurry to raise rates. UK interest rates have remained at 0.5% since March 2009. Given the current weak pace of growth and persistently low inflation, most economists do not expect the BoE to hike rates until at least the second quarter of 2016. British consumer prices dropped by 0.1% in October, and are expected to stay close to zero for a few more months.
Following the dovish comments from Carney, BoE chief economist Andrew Haldane said the UK economy and inflation outlook are skewed downward amid external headwinds. Haldane said that the central bank should be even ready to slash interest rates if needed and a "third phase" of the global financial crisis, stemming from emerging markets, could have a prolonged impact on the global growth. Supporting this view, Kristin Forbes, a member of the rate-setting Monetary Policy Committee, said if there is any unexpected shock, she could consider further loosening of the policy.
UK Autumn Forecast Statement and US Core Durable Goods Orders
From the UK the Autumn Forecast Statement is the even to pay attention to, as it provides an updated economic outlook and previews the government's budget for the coming year. Domestic government spending and borrowing levels in this report could have a substantial impact on the economy and, thus, cause volatility on the market.
From the US the most significant events today are the Durable and Core Durable Goods Orders. The Durable Goods Orders measure the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, while the Core ones exclude the transport sector. As those durable products often involve large investments they are sensitive to the US economic situation. Both are forecasted to rebound and are likely to be the main drivers today. However, a number of fundamental data from the US are due today, that could have further impact on the market. Even though those secondary events, such as the New Home Sales or Personal Spending/Income, are also forecasted to improve, failure to meet expectations might weigh on the US currency.
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: bias still negative
The Cable's volatility almost reached the second support area yesterday, with trade closing at 1.5077, slightly above the expected level. The Sterling is now attempting to regain the bullish momentum, but the daily and weekly technical studies remain bearish. The Pound is now under the risk of falling under the major level of 1.50, even though the Bollinger band is bolstering that area. Furthermore, the GBP/USD is first required to breach the weekly S2 and the November low (1.5027) in order to reach this target.
Daily chart
The Pound has been suffering against the US currency since the end of the previous week, edging closer to the 1.50 major level. The nearest target to cause a rebound is the November low, while the 23.60% Fibo and the 200-hour SMA are providing resistance near 1.52.
Hourly chart
Bulls now outnumbering the bears
Bulls took the upper hand, with 52% of all positions now long (previously 49%). Meanwhile, the gap between buy and sell orders keeps narrowing; today 43% of all commands are to buy the Pound.
Both OANDA and SAXO Group retain a bearish outlook towards the GBP/USD. At OANDA, 51% of traders are holding short positions and the remaining 49% - long. Meanwhile, the share of bears at SAXO Group is taking up 55% of the market, down from 64% on Tuesday.
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 1.46-1.48 price range, but selected by only 13% of participants. Meanwhile, the mean forecast for Feb 25 is 1.5223.
This week sentiment among Dukascopy traders has significantly worsened, as now 70% of traders predict the Pound to lose value, while last week this scenario was suggested by 50% of Community members. Alongside, the average forecast for the end of the week is placed around the 1.508 level.
Jignesh, a member of the Dukascopy Community, changed his outlook from bullish to bearish this week, expecting the Pound to weaken against the Buck. According to Jignesh "the GBP/USD showed very strong momentum to the downside late last week, after struggling at highs. It has not broken the up-trend line and looking very bearish from a technical stand point."
At the same time, nico67 believes that the Sterling could still outperform the US currency by the end of this week. "The pair has been stagnant within 1.5100 and 1.5300 from recent highs of 1.5600 and the drop from that level has been very slow," he commented.