- The share of sell orders takes up 57% of the market
- 54% of all positions are long
- Immediate resistance is represented by the weekly S1 at 1.5114
- 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 Second Estimate GDP, UK Preliminary Business Investment
The British currency mostly declined against other major peers on Thursday, with exception against the Aussie. The largest fall was registered against the Yen (0.32%), followed by 0.18% and 0.14% losses against the Greenback and the Loonie, respectively. Nevertheless, the Sterling managed to appreciate 0.18% versus the Aussie, while also remaining relatively unchanged against the Swisse (0.01%), the Euro (-0.05%) and the Kiwi (-0.07%).
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.
UK GDP Second Estimate
The UK Second Estimate GDP release is scheduled for today. 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 today, unless the GDP data surprises to the upside, strengthening the British currency, as technical studies suggest. Meanwhile, the from the US side no significant fundamental events are scheduled for today.
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 made its way closer to the Nov low yesterday, by falling towards the major level of 1.51 against the US Dollar. The Cable appears to be glued to the weekly S1 level and refuses to drop below 1.5075 this week, suggesting that the exchange rate could edge approximately 25 pips higher today. Although technical studies are bolstering this outcome with their bullish signals, the downslide might be extended with the weekly S2 and the Nov low acting as the nearest support around 1.5035.
Daily chart
Although the GBP/USD declined yesterday, a new potential up-trend appeared from the intraday rebound yesterday. Currently the Cable is edging closer to the trend-line, which will be confirmed if the bullish momentum is regained after touching the line. Technical studies support the possibility of a rebound today.
Hourly chart
Bulls now outnumbering the bears
The outlook towards the GBP/USD improved again today, with 54% of all positions being long (previously 53%). The share of sell orders barely changed over the day, taking up 57% of the market.
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 59% of the market, up from 58% on Thursday.
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 slightly more than a fifth (19%) of the voters, while the second choice in popularity was the 1.46-1.48 price range, both selected by only 15% of participants. Meanwhile, the mean forecast for Feb 27 is 1.5215.
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.