- 64% of all orders are to buy the Sterling today
- Bullish market sentiment remains unchanged at 68%
- Immediate support is represented by the monthly S1 at 1.4868
- The weekly PP and 20-day SMA around 1.5010 are the nearest resistance
- 70% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events: US Jobless Claims, US Goods Trade Balance, US CB Consumer Confidence
The British currency appreciated against most major peers on Wednesday, amid the gap between imported and exported goods and services being narrower. The Sterling added 0.71% against the Euro and 0.66% against the Swissie, with another significant gain of 0.47% registered against the Kiwi. The Pound, however, was not so lucky versus another commodity currency, namely the Loonie, as it lost 0.22% against it.
The UK economy grew less strongly than previously estimated in both the second and third quarters, providing the Bank of England with more reason to remain cautious as it ponders when to raise interest rates from all-time low. The British economy expanded 0.4% in the three months through September, compared with a previous estimate of 0.5%, while annual growth was lowered by two percentage points to 2.1%. Furthermore, growth in the second quarter was revised down more sharply. GDP in the June quarter was downgraded to 0.5% from 0.7%. Weaker growth in the services sector, particularly in financial services, was the main reason behind the new, lower assessment of growth for the July-September period, according to the Office for National Statistics.
In a separate report, the ONS said growth in unit labour costs slowed to an annual 2.0% from 2.2% in the second quarter, while a measure of productivity remained unchanged. The BoE Governor Mark Carney said he wants to see unit labour costs increasing, among other factors, before considering hiking rates. In addition, Britain's current account deficit, considered one of the weak points of the country's economic recovery, remained almost stable in the July-September period at 3.7% of GDP, down from 3.8% in the second quarter. At 17.5 billion pounds, the deficit was lower than a forecast 21.5 billion pounds.
US Jobless Claims are the main event today
As almost every Thursday the US Department of Labor is to release the Initial Jobless Claims today. It is a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. According to the forecast, the Jobless Claims are likely to remain relatively unchanged, therefore, the impact on the market is to be minimal. This release is also the only significant economic data release on this Christmas day.
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 takes a shot at climbing over the down-trend
Although the GBP/USD currency pair appreciated on Wednesday, the immediate resistance in face of the monthly S1 somewhat managed to prevent the price from returning inside the pattern's borders. Nevertheless, the monthly S1 is providing support today, being the only obstacle holding the Cable from edging lower. Even though a rebound is possible, the chance of downside movement is higher. Technical studies, which were quite reliable this week, also give bearish signals, suggesting yesterday's gains could be erased. Meanwhile, the nearest support is located just under the 1.48 level.
Daily chart
On the hourly chart the Cable is seen struggling to advance further than the 1.49 major level, as the possible down-trend is providing resistance and preventing the pair from completely returning within the falling wedge's pattern. The 200-hour SMA is also edging lower and is soon to provide additional resistance.
Hourly chart
Bulls keep growing stronger
Bullish market sentiment remains unchanged at 68%, whereas 64% of all orders are to buy the Sterling today (up from 61% yesterday).
SAXO Group and OANDA now have different perspectives towards the GBP/USD. Among SAXO Group traders the majority shifted back to the bearish side, expecting the Pound to weaken against the US Dollar, as 60% of their positions are short (previously 48%). Meanwhile, 64% of OANDA traders have a positive outlook towards the Cable, compared to 63% 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 (70%) believe the GBP/USD is going to cost 1.54 or less US dollars in three months. According to the survey, the most popular choice was the one implying that the Sterling will cost somewhere between 1.42 and 1.44 dollars in three months, selected by 21% of the voters. Meanwhile, the second most popular choice was the 1.46-1.48 interval, voted for by 16% of the surveyed. At the same time, the mean forecast for Mar 24 is 1.5025.
In course of this working week, Dukascopy Community members forecast the GBP/USD pair to drop further, as almost 56% of all votes stay bearish.
In the majority, namely on the bullish side of the barricade, one of the Dukascopy Community members by the nickname megajorko commented that "the Cable has recently experienced a strong pressure." He also added the following: "Now I suppose it will return to the magic level of 1.5."
On the opposite side of the barricade and among the bears gereltod suggests that the pair is descending within a bearish channel. "Currently, it is hitting the bottom barrier and might pullback a little, then continue with the trend," he mentioned.