- Buy orders are outnumbering the sell ones by only 2% points
- 65% of all positions are long
- Immediate resistance is represented by the weekly PP at 1.4899
- The down-trend, the monthly and weekly S1s around 1.4860 are the nearest support
- 60% 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
The Sterling's performance somewhat improved, as it posted rather solid gains against some commodity currencies and the Swiss Franc. The Pound added 0.84% against the Loonie and 0.37% against the Aussie, while also adding 0.24% against the Swissie. At the same time, the British currency declined against the Euro (0.29%), the Yen (0.23%), the Greenback (0.22%) and the Kiwi (0.11%).
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.
US Goods Trade Balance and CB Consumer Confidence
The only relevant economic data releases today are 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 attempts to bounce back from the down-trend
The Sterling slightly exceeded expectations yesterday, as the corrective decline stretched beyond the immediate support. As a result, the GBP/USD retested the falling wedge's lower border, but today's performance will determine future viability of this pattern. The lower border is also reinforced by the monthly and weekly S1s, suggesting a rebound is due; with the weekly PP at 1.4899 as the nearest resistance, which is likely to be ignored if bulls prevail. However, technical studies retain bearish signals, implying that a breakout from the pattern's trading range is also possible.
Daily chart
The Cable's attempts to appreciate on Monday were in vain, as the 200-hour SMA was providing too much resistance. However, the pair remained a few pips away from the falling wedge's lower border, rebounding from 1.4875 level, creating a possibility for a new up-trend to emerge; which, in turn could lead the GBP/USD towards the wedge's upper border.
Hourly chart
Bulls remain strong
Bulls keep losing ground, as 65% of all positions are long (previously 66%). Buy orders are outnumbering the sell ones by only 2% points.
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 61%). Meanwhile, 61% of OANDA traders have a positive outlook towards the Cable, compared to 62% on Monday.
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 (60%) 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, believed by 21% of the voters. Meanwhile, the second most popular choice is the 1.54-1.56 interval, voted for by 15% of the surveyed. At the same time, the mean forecast for Mar 29 is 1.511.