- The number of sell orders climbed up to 58%
- 53% of traders are holding long positions
- Immediate resistance is represented by the 23.60% Fibo at 1.5185
- The weekly S1 at 1.5114 is the nearest support
- 67% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events today: UK Second Estimate GDP, UK Preliminary Business Investment
The Autumn Forecast Statement helped the UK currency to strengthen against most major peers yesterday. The largest gain was detected versus the Swissie, 0.80%, while the Pound added 0.49% and 0.48% against the Euro and the Yen, respectively. The Sterling struggled to advance the most versus the Loonie, gaining only 0.17%; however, a decline of 0.06% was registered against the New Zealand Dollar.
Delivering the Autumn Statement and Spending Review, Chancellor George Osborne said the British economy is expected to expand by 2.4% this year. Moreover, growth for the next two years has also been revised up to 2.4% in 2016 and 2.5% in 2017. Osborne underlined the fact that since 2010 no economy in the G-7 group has expanded faster than the UK. Most importantly, the growth has been sustainable and has not been fuelled by an irresponsible banking boom. In his statement, the Chancellor said his economic plan for the next four years was about choosing priorities and insisted solving the "crisis" in home ownership is of a paramount importance. Osborne added that the four-year public spending plans were estimated to produce a surplus of 10.1 billion pounds by the end of the current parliament, which is more than he had projected in his budget speech in July.
This year, the Autumn Statement and the Spending Review are combined. The spending review shows how the British government will spend the 4 trillion pounds of taxpayers' money at its disposal. The Statement is one of the government's biannual updates to its plans for the UK economy.
Relatively quiet Thursday
There is a bank holiday in the US and no significant fundamental events from the UK due today, leaving the Cable in search for other movers. However, the UK Second Estimate GDP release is scheduled for tomorrow. Due to it being the second release, the impact on the Sterling should not be as substantial as the preliminary report. Nonetheless, the rate of growth is expected to remain flat, while the preliminary business investment is expected to slow down. As a result, the British Pound might weaken 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 trades flat, attempts to prolong the rally
The Sterling outperformed the US Dollar yesterday, amid the budget announcement in the Autumn Forecast Statement. However, despite this correction, the Cable is still expected to touch the Nov low of 1.5026, before making its way higher to retest the down-trend. The weekly S1 is an obstacle today, providing immediate support and holding the losses for now. Technical studies in the daily timeframe shifted from bearish to mixed, suggesting there is a possibility for the GBP/USD to extend the rally, also taking advantage of the US bank holiday today.
Daily chart
The GBP/USD rebounded from the Tuesday's low yesterday, ending the day with a surge. The 23.60% Fibo and the 200-hour SMA keep providing resistance, but it might lie out of reach if the pair fails to regain the bullish momentum from the 1.51 level today.
Hourly chart
Bulls now outnumbering the bears
Today 53% of traders are holding long positions (previously 52%), whereas the number of sell orders added 1% point, climbing to 58%.
Both OANDA and SAXO Group retain a bearish outlook towards the GBP/USD. At OANDA, 54% of traders are holding long positions and the remaining 46% - short. Meanwhile, the share of bears at SAXO Group is taking up 58% of the market, up from 55% on Wednesday.
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 (67%) 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 slightly more than a fifth (21%) of the voters, while the second choices in popularity were the 1.46-1.48 and 1.50-1.52 price ranges, both selected by only 13% of participants. Meanwhile, the mean forecast for Feb 26 is 1.5208.
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.