- The portion of orders to buy the Pound increased to 72%
- The share of bulls remains unchanged at 56%,
- Immediate resistance is represented by the monthly PP and the 23.60% Fibo around 1.5185
- The weekly R1 and the 20-day SMA around 1.5145 are the nearest support
- 71% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events today: US Average Hourly Earnings, US Non-Farm Employment Change, US Unemployment Rate, US Trade Balance
The Sterling experienced mixed performance over the day, but, nonetheless, appreciated against most major peers. The largest gains of 1.38% and 1.29% were recorded against the Loonie and the US Dollar, respectively, followed by a 0.85% gain versus the Aussie and 0.76% against the Yen. The British Pound also declined against the Swiss Franc (1.20%), while the ECB's decision pushed the EUR/GBP 1.73% higher.
Business activity in the UK services sector rose at the fastest pace in four months in November, suggesting a stronger economic growth in the final quarter of the year. The Markit/CIPS UK services PMI climbed to 55.9 last month from 54.9 in October, offsetting the weakness in manufacturing and construction sectors. There were some signs in the services survey that price pressures were building, albeit from low levels. Input prices, which include wages, rose at the fastest pace in four months, something that is likely to cheer up the Bank of England. Markit's UK composite PMI, which combines data from the manufacturing, services and construction surveys, was steady in November at 55.7, the highest level since July. The British economy is on track to grow 0.6% in the fourth quarter, accelerating from the 0.5% pace in the July-September period. The Office for Budget Responsibility revised up the growth outlook for next year, saying it predicts the UK economy to grow by 2.4% in 2015 and 2016 - up one basis point for 2016 when compared to the July outlook. It also upped the growth outlook for 2017 by one basis point to 2.5%, before sliding to 2.4% in 2018, and slightly lower to 2.3% in 2019-2020.
The Bank of England announces its next policy decision on December 10. Traders are betting officials will keep the benchmark rate at a record-low 0.5% through 2016.
US Non-Farm Employment Change
With no significant events from the UK scheduled for today, all focus shifts to the US Non-Farm Payrolls data. The Non-Farm Payrolls are released by the US Department of Labor and present the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be excessively volatile. A rather gradual decline is expected, compared to the previous upbeat figure, but the payrolls could still beat expectations today. However, the US Average Hourly Earnings (due at the same time) are forecasted to fall, whereas the Unemployment Rate to remain unchanged. This secondary data could put more pressure on the US currency, but should be outweighed by any better-than-expected Payrolls number.
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 forms falling wedge from Thursday's surge
The US Dollar experienced a harsh sell-off on Thursday, mainly caused by the ECB's unexpected stimulus decision, as well as a set of weak US fundamentals. As a result, the Cable skyrocketed, meeting resistance only in face of the third cluster at 1.5145, namely the 20-day SMA and the weekly R1. A correction is likely to take place today, forcing the GBP/USD to drop below 1.51, with the target support located at 1.5088 in face of the weekly PP. However, disappointment in the US employment sector could trigger a rally, causing the Sterling to return above the 23.60% Fibo.
Daily chart
On the hourly chart the GBP/USD is clearly seen rebounding from a four-month support line, now only strengthening this down-trend and a formed falling wedge. The Cable is now undergoing a correction, with a chance of the 200-hour SMA limiting the losses and possibly leaving the pair's price at a two-week high if the 23.60% Fibo is breached.
Hourly chart
Market sentiment bullish again
Although the share of bulls remains unchanged at 56%, the portion of orders to buy the Pound added 38 percentage points up to 72%.
OANDA and SAXO Group now have a similar, yet different outlooks towards the GBP/USD. At OANDA 55% of traders are holding long positions and the remaining 45% - short. Meanwhile, the share of bulls at SAXO Group is taking up 45% of the market, down from 51% 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 (71%) 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 less than a quarter (23%) of the voters, while the second choice in popularity was the 1.46-1.48 price interval, selected by 13% of survey participants. Meanwhile, the mean forecast for Mar 04 is 1.5138.
Majority of Dukascopy Community members are bearish on the pair, with 64% of votes speaking in favour of pair's depreciation. Nevertheless, the pair is likely to reach 1.509 by this Friday.
Among the bulls a member of the Dukascopy Community, Likerty, shared his thoughts on the Cable's possible performance: "the Pound is ready for a new medium term bullish correction, but probably will stay slow within the next week."
Meanwhile, a trader with a bearish perspective towards the GBP/USD, Jignesh, believes that the Cable continues its bearish trend with renewed pressure in the last week. "The pair is however approaching some major support levels at the 1.50 level, where a major channel comes into play as well," he added.