- The number of sell orders take up 68% of the market
- Bulls remain strong, with 62% of all open positions being long.
- Immediate resistance is represented by the weekly PP, the monthly S2 and the down-trend around 1.4380
- y The weekly S1 at 1.4142 is the nearest support
- 73% of traders reckon GBP/USD will be at 1.50 or lower in three months
- Upcoming events: Philadelphia Fed Manufacturing Index, US Jobless Claims, US Crude Oil Inventories, UK Retail Sales, UK Public Sector Net Borrowing
A strong reading of UK Claimant Count Change and the UK Unemployment Rate caused the Sterling to outperform most of other major peers. The Pound appreciated 0.39% against the Euro, 0.32% versus the Swissie and 0.24% against both the Greenback and the Aussie. At the same time, a weak reading of the Average Earnings Index caused the British Currency to decline 0.36% versus the Yen and 0.28% versus the Loonie. The Sterling also remained relatively unchanged against the Kiwi, losing 0.07%.
The UK unemployment rate unexpectedly declined to the lowest level in almost a decade, while wage growth slowed less than predicted as the labour market continued to improve. Wages excluding bonuses climbed 1.9% in the quarter to November from a year earlier, down from 2% in the three months through October, the Office for National Statistics reported. Meanwhile, total pay growth, including bonuses, slowed to 2% in the three months through November from 2.4% in the previous period. There were 267,000 more people with jobs in those three months, when compared to the previous quarter, and 588,000 more than a year ago. As a result, the employment rate rose to 74.0%, the highest level since records began in 1971. The jobless rate dropped to 5.1%, the lowest since the three months through January 2006.
The earnings data came in line with Bank of England Governor Mark Carney comments, when he referred to weaker wage growth as one of the main factors in deciding to refrain from immediate interest rate hike. In addition, Carney cited ongoing decline in oil prices and volatility in China. Thus, the central bank is likely to remain in a wait-and-see mode for some time to come, while investors shift their bets for rate hike into 2017.
Philly Fed Manufacturing Index is today's main driver
There are no significant UK fundamental events today, thus, focus shifts to the US data later today. First of all, the Philadelphia Fed Survey, which is a spread index of manufacturing conditions (movements of manufacturing) within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM manufacturing Index (Institute for Supply Management) and the index of industrial production. It is also used as a forecast of The ISM Index. It is likely to cause some volatility, as a rather gradual change is expected in the figure today. At the same time, the Initial Jobless Claims will be released by the US Department of Labor. The Jobless Claims are 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. Even though there is expected an improvement in the Jobless Claims number, the impact on the market prices is to be mild.
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 keeps hovering over 1.4150
The Sterling mostly ignored positive labour market data on Wednesday, appreciating only 32 pips against the US Dollar. However, the GBP/USD currency pair remains subject to weakness and is likely to experience another decline today. The weekly S1 remains the closest support, which succeeded in preventing the Cable from dropping lower, so far. A stronger cluster rests around 1.4035, but a fall that low today is doubtful. Meanwhile, technical studies retain mixed signals, suggesting Pound could retake the 1.42 level, especially if the US fundamental data disappoints today.
Daily chart
After having slumped on Tuesday, the GBP/USD began consolidating between 1.4120 and 1.42 levels. The consolidation lasted through Wednesday and continues to remain muted today as well. The bearish trend is intact, but the support line was broken, suggesting the Cable could extend losses even further.
Hourly chart
Bulls remain strong
Bulls remain strong, with 62% of all open positions being long. The number of sell orders is unchanged, taking up 68% of the market.
Meanwhile, other market participants have somewhat similar outlooks towards the GBP/USD, such as OANDA. At the moment 59% of OANDA traders hold long positions (previously 61%); however, the sentiment of SAXO Bank shifted to the bullish side, as 53% of their open positions are long, compared to 47% previously.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.50 in three months
The majority of traders (72%) still believe the British currency is to cost 1.50 or less dollars after a three-month period. The most popular price interval was selected by 27% of the voters, namely the 1.42-1.44 one, while the second most popular choice implies the Pound is to cost between 1.48 and 1.50 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for April 21 is 1.464.
Participants of the Dukascopy Community Forecasts quiz support the general negative view on the pair, with 62% of all votes being short at the moment.
Babanu, a trader with the Dukascopy Community, expects the Sterling to end the week higher against the US Dollar. He suggests that a rebound might be due, as the in the last month the GBP/USD lost 1000 pips. "This big short move might show some signs of exhaustion soon," he commented.
Meanwhile, among the Community members with a bearish outlook towards the Sterling, AgentSmith believes that "The Pound remains on the offer as it comes under pressure in the crosses, particularly EUR/GBP. I remain bullish on the Pound in the longer term but with such heavy pressure over the last couple of weeks it's a fool's game trying to catch a falling knife." AgentSmith suggests to look for sharp reversals to signal the end of the trend.