- The portion of buy orders declined from 64 to 59%
- A relatively large part (66%) of traders retain a positive outlook towards the GBP/USD
- Immediate resistance is represented by the weekly R1 and 20-day SMA around 1.50
- The weekly PP and 20-day SMA around 1.4899 are the nearest support
- 63% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events: US Goods Trade Balance, US CB Consumer Confidence
Over the Christmas holiday the Sterling declined against most major peers, with exception against the US Dollar and the Loonie. The Pound lost the most against the Euro (0.22%), followed by slightly lesser declines of 0.18%, 0.14% and 0.13% against the Aussie, the Yen and the Swissie, respectively. Nevertheless, the Cable edged 0.26% higher, while remaining relatively unchanged against the Loonie (0.05%) and the Kiwi (-0.02%).
The number of Americans applying for unemployment benefits declined more than expected last week, adding to signs labour market conditions continued to tighten. Initial claims for jobless benefits decreased 5,000 to a seasonally adjusted 267,000 in the week ended December 19, near levels last seen in late 1973, according to the Labor Department. Economists had projected claims falling to 270,000. Claims have been below 300,000, a threshold associated with a strong labour market, for 42 weeks in a row, the longest stretch since the early 1970s. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, climbed 1,750 to 272,500 last week. The report also showed the number of people still receiving benefits after an initial week of aid dropped 47,000 to 2.20 million in the week ended Dec. 12. The four-week moving average of the so-called continuing claims rose 10,000 to 2.21 million.
Improvements in the labour market is helping to boost consumer spending, supporting the world's biggest economy as it faces the headwinds of a strong Dollar, slowing global growth, spending cuts by energy firms and an inventory overhang. The US jobless rate was at 5.0% last month, the lowest level in more than seven years.
Quiet Monday
With no significant events concerning the US economy and a bank holiday in the UK today, attention should be paid to tomorrow's economic data releases, namely the US Goods Trade Balance and US CB Consumer Confidence. The US Goods Trade Balance shows the difference in value between exported and imported goods; it also provides insight in the total Trade Balance data, as trade in goods makes approximately 75% of total trade. The second event, the CB Consumer Confidence is released by the Conference Board and captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. According to the forecast, the CB Consumer Confidence is expected to grow, thus, strengthening the US Dollar.
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 prolongs trade within the falling wedge
The British currency ended last week with another rally, rebounding from intraday low and, thus, erasing all previous week's losses. Today the Sterling remains under the risk of edging lower, as technical studies suggest with their bearish signals. The closest level to stop the dips is located at 1.4899, namely the weekly PP; meanwhile, the immediate resistance lies around the 1.50 major level. However, due to a rather quiet day on the market in terms of fundamental data, the Cable could remain in limbo circa 1.4915.
Daily chart
The hourly chart shows the GBP/USD regaining the bullish momentum in the middle of the previous week, which allowed the pair to return within the pattern's borders. The possible down-trend on Christmas failed to hold the gains, while the 200-hour SMA succeeded. The given SMA continues to provide resistance and prevent the Cable from appreciating. Ultimately, it can result in a retest of the wedge's lower border.
Hourly chart
Bulls remain strong
A relatively large part (66%) of traders retain a positive outlook towards the GBP/USD, compared to 68% last Thursday. At the same time, the portion of buy orders declined from 64 to 59%.
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 61% of their positions are short (previously 49%). Meanwhile, 62% of OANDA traders have a positive outlook towards the Cable, compared to 64% last Thursday.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.54 in three months
The majority of votes is still on the bearish side, as most of the survey participants (63%) 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 1.44 dollars or less in three months, beleived by 20% of the voters. Meanwhile, the second most popular choice was divided between the 1.46-1.48 and the 1.54-1.56 intervals, both voted for by 13% of the surveyed. At the same time, the mean forecast for Mar 28 is 1.5097.