- The portion of buy orders added 22% points up to 54%
- 67% of all open positions are now long
- Immediate resistance is represented by the weekly PP, the monthly S2 and the down-trend around 1.4375
- y The weekly S1 at 1.4142 is the nearest support
- 75% of traders reckon GBP/USD will be at 1.50 or lower in three months
- Upcoming events: UK Retail Sales, UK Public Sector Net Borrowing, MPC Member Cunliffe Speech, US Markit Manufacturing PMI, US Existing Home Sales, US CB Leading Index
The British currency appreciated against most major peers on Thursday, with exception against the commodity-based currencies. The Sterling advanced the most versus the Yen, adding 0.87%, while the second notable rally was registered against the Swissie, namely 0.53%. The Cable was the worst performer, as it edged only 0.20% higher. At the same time, due to a rebound in oil prices, the Pound suffered a 1.43% loss versus the Loonie, 1.31% versus the Kiwi and 1.10% against the Aussie.
Initial claims for unemployment benefits in the US surged to the highest level in six weeks for the five-day period ended January 16, judging by the Labour Department's data released Thursday. Such a move was somewhat unexpected for the markets that expected a decline from 283,000 to 279,000. However, the real weekly number came out at 293,000. This statistics coincides with the time frame when US officials are starting to survey businesses and households about employment conditions in January. Recent setbacks in terms of oil prices and strong US Dollar are putting more pressure on energy and manufacturing sectors' headcounts. Despite that, only a sustained increase in unemployment claims will be able to signal some weakness in the US labour market.
In the meantime, one of the closely watched manufacturing surveys in the US showed conditions are moving towards improvement in the Philadelphia Fed district. Survey of industrial sector produced a reading of –3 points for January, up from –5.9 points in the preceding month. At the same time, positive outlook will be affirmed only after the indicator comes back above zero. For now producers are hit by weaker global demand for US-producer goods, as new orders are falling sharply. As for the oil price rout, the Third Federal District, which includes Philadelphia, is less impacted by price declines due to smaller dependence on energy sector.
UK Retail Sales release is the main driver, but US data should also pack a wallop
A number of data are due today, concerning both the UK and the US economy. First of all, the UK Retail Sales are scheduled for today, they are released by the National Statistics 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. A rather gradual decline is forecasted, but taking into account positive surprises of other UK economic data releases, we might see the figures of Retail Sales also beat expectations. Second, the UK Public Sector Net Borrowing, which shows the difference between spending and income for the central and local governments, as well as for public corporations. A positive number indicates a budget deficit, while a negative one indicates a surplus. According to the forecast, a rather significant improvement is expected in the Public Sector Net Borrowing. Finally, from the US Side there are two events worth paying attention to, namely the Markit Manufacturing PMI and the Existing Home Sales. The Manufacturing Purchasing Managers Index (PMI) is released by the Markit Economics and captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the United States. The Existing Home Sales, released by the National Association of Realtors, provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. Mixed results are anticipated among the US data and are likely to cause some volatility.
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 on the edge of closing below 1.41
The Cable managed to climb 31 pips higher yesterday, despite having dropped to the lowest in six years earlier that day. Even though the pair has been recovering for the past two days, risk of it slumping today and piercing the weekly S1 increased. As a result, the GBP/USD could even put the monthly S3 to the test, while bearish technical indicators are bolstering the possibility of the negative outcome. However, a positive surprise in fundamental data could also trigger a rally, with the Pound confirming the down-trend, which in turn is bolstered by the weekly PP and the monthly S2.
Daily chart
On the hourly chart the GBP/USD was seen regaining the bullish momentum and confirming the down-trend near the end of Thursday. However, the pair is now on the edge of breaking that down-trend, meaning that we might see a rally in spite of other signals pointing to the downside.
Hourly chart
Bulls remain strong
Bulls grew in numbers, as 67% of all open positions are now long. Meanwhile, the portion of buy orders added 22% points up to 54%.
Meanwhile, other market participants have somewhat similar outlooks towards the GBP/USD, such as OANDA. At the moment 60% of OANDA traders hold long positions (previously 59%), whereas the sentiment of SAXO Bank keeps improving, as 54% of their open positions are long, compared to 53% previously.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.50 in three months
Three quarters of traders (75%) 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 26% 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 22 is 1.4622.
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.