- Sell orders are now outnumbering the buy ones by 4% points
- 52% of all positions are now long
- Immediate support is represented by 20-day SMA around 1.5127
- The monthly PP and the 23.60% Fibo at 1.5185 are the nearest resistance
- 67% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events: UK Construction Output, UK Consumer Inflation Expectations, US Retail and Core Retail Sales, US PPI and Core PPI, US Preliminary UoM Consumer Sentiment, US Business Inventories, MPC Member Weale Speech
The Pound declined against most of commodity currencies and some other major peers, but also managed advance against other currencies. The Sterling suffered the most against the Aussie and the Kiwi, edging down 0.84% and 0.64%, respectively. The Cable fell down 0.14%, whereas the GBP/JPY remained relatively unchanged (-0.04%). At the same time, the British currency appreciated versus the Euro (0.62%), the Swiss Franc (0.31%) and the Loonie (0.19%).
The Bank of England kept interest rates at record lows, pointing to lower oil prices and weak wage growth, which is likely to keep a lid on inflation for some time to come. The nine-member Monetary Policy Committee voted eight to one to leave the main interest rate at 0.5%, where it has been since 2009. Policy makers voted unanimously to maintain the size of the BoE's bond portfolio at 375 billion pounds. For the majority officials, the outlook for growth and inflation in Britain does not yet justify a hike in the BoE's benchmark rate. Consumer inflation dropped 0.1% on the year in October and the gauge is expected to stay below the central bank's target of 2% throughout 2016. Investors expect the BoE to raise interest rates late next year or early 2017.
Meanwhile, a separate report showed the UK's trade deficit widened sharply in October as imports rose. In the three months to October, the total trade shortfall increased to £8.4bn. More broadly, the import of goods jumped from £2.3bn to £35.4bnon month in October. At the same time, exports of goods decreased by £700m to £23.5bn, with many firms blaming a strong Sterling for a loss of competitive advantage.
US Retail and Core Retails sales are the main Friday's drivers
The UK fundamentals today are unlikely to have any serious impact on the markets, therefore, all focus shifts to the US fundamentals. The most important ones are the Retail and Core Retail Sales. The Retail Sales are released by the US Census Bureau and measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core Retail Sales, however, exclude automobile sales and could also be revised rather significantly at a future date. Both of the releases are forecasted to show a stronger figure, thus, boosting the US currency. At the same time, the US PPI is due, which measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. The PPI is also expected to rebound.
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 weakens ahead of US data
The Cable was a few steps away from touching the major level of 1.51 yesterday, but rebounded from the daily low, with trade closing at 1.5161. Even though the immediate support remained intact, the Greenback is likely to drive the GBP/USD pair lower today, piercing that level and taking another shot at 1.51. However, weekly technical studies were bearish through all five days, suggesting the exchange rate could even drop to 1.50 today. The daily indicators, on the other hand, remain mixed, creating a possibility of another rally today, with the down-trend at 1.5280 getting confirmed.
Daily chart
On the hourly chart the Cable is seen attempting to break through the 23.60% Fibo, but was unsuccessful for almost two days. The GBP/USD currency pair is likely to make another attempt at breaching the resistance ahead of the US Retail Sales release, but in case of a drop, the 200-hour SMA currently at 1.5074 will doubtfully manage to hold the losses.
Hourly chart
Market sentiment now bearish
Sentiment shifted to the bullish side, with 52% of all positions now long. Sell orders are now outnumbering the buy ones by 4% points.
OANDA and SAXO Group now both have a negative 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 67% of the market, compared to 62% 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 (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 exactly a fifth (20%) of the voters, while the second choice in popularity is divided between two intervals. The first interval is the 1.46-1.48, whereas the second one implies that the Sterling will cost less than 1.44 dollars in three months, both of which were chosen by 14% of survey participants. Meanwhile, the mean forecast for Mar 11 is 1.5128.
Most of the Dukascopy Community members this week have a negative outlook towards the GBP/USD currency pair, being that 39% of them are long the Sterling and the remaining 61% are short.
Babanu, a trader of the Dukascopy Community, believes that the Pound could outperform the US Dollar by week's end. "I suppose the Pound may found support at weekly pivot, but overall the pair looks ready challenge the weekly resistance at 1.5210 level," babanu commented.
Another trader, shanziester, said that the Cable usually follows the trend of the EUR/USD. "You can see it has moved in the same direction. The pair is highly overvalued now and we can definitely expect a major pullback on Friday," he added.