- Share of sell orders dropped from 64 to 56%
- 57% of positions are short instead of 61% recorded yesterday
- Upper boundary of the emerging channel is at 1.4470
- 200-hour SMA is at 1.4310
- 69% of traders reckon GBP/USD will be at 1.48 or lower in three months
- Upcoming events: UK Services PMI, US ADP Non-Farm Employment Change, ISM Non-Manufacturing PMI, Crude Oil Inventories
Despite the weak fundamentals the Sterling performed relatively well on Tuesday, gaining 0.88, 0.61, and 0.34% against the Australian, Canadian, and New Zealand dollars, respectively. Meanwhile, the largest loss was in its cross with the Japanese Yen - minus one percent.
Growth in the UK construction sector unexpectedly slowed in January to the weakest level in nine months following a short-lived recovery in December. The Markit/CIPS UK construction PMI fell to 55.0 from 57.8, against economists' forecast of 57.5. Housebuilding and commercial property work were the biggest drag on the headline indicator. Furthermore, optimism among construction companies fell to the lowest level since December 2014. Even though employment within the sector was sustained in January, it rose at the weakest pace for more than two years. Construction remains one of the most volatile components on the output side of the UK's gross domestic product. It was again among the downward drivers in the final quarter of 2015, when it dropped 0.1% from the third quarter. Overall Britain's economy grew 0.5% in the December quarter, up from the downwardly revised 0.4% in the preceding trimester. Services remained the biggest driver of the economy, accounting for 78% of GDP.
Investors' eyes now turn to the services PMI due Wednesday and "Super Thursday", when the Bank of England announces its policy stance and publishes the Monetary Policy Committee minutes as well as quarterly Inflation Report forecasts.
Last PMI before 'Super Thursday'
Among the main events today for the Cable is the services PMI, which is expected to lose 0.1 compared to the previous figure and come in at 55.4. Later in the day the focus will shift to the US data, such as the ADP NFP, which is expected to decrease from 257K to 193K, and ISM non-manufacturing PMI, which is also expected to deteriorate, but from 55.3 to 55.1.
GBP/USD eyes 1.4680/50
After piercing through the monthly pivot point the Cable confirmed 1.4389/80 as the new support. Therefore, the chances are that for now the currency will keep appreciating against the Dollar. The closest significant resistance is at 1.4533 (weekly R1), but in case of a healthy recovery this is unlikely to stop the pair, and a rally up to 1.4681/53 remains the base scenario. Additional resistance is at 1.4763 (55-day SMA), but anything below 1.50 is bearish.
Daily chart
In the lower timeframe GBP/USD appears to be trading in an ascending channel, though the lower boundary of the pattern has only two confirmations, making the entry points for potential longs unreliable. Still, the current position of the pair right at the resistance trend-line is favourable for a sell-off, which is likely to stop at 1.4310 (200-hour SMA) before moving further towards the up-trend at 1.4240.
Hourly chart
Sentiment improves but stays negative
The current sentiment in the SWFX market is a little less bearish than yesterday—57% of positions are short instead of 61% recorded yesterday. Something similar happened to the orders—the share of sell ones dropped from 64 to 56%.
OANDA and Saxo Bank clients have a different opinion regarding the prospects for the Pound. Clients of the Canadian-based foreign exchange company are mostly bullish - 59% are currently holding long positions. At the same time, traders at Saxo Bank seem to be undecided - a half of the market is bullish and a half is bearish.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.50 in three months
The majority of traders (69%) believe the British currency is to cost 1.48 or less dollars after a three-month period. The most popular price interval was selected by slightly less than a quarter (26%) of the voters, namely the 1.42-1.44 one, while the second most popular choice implies the Pound is to cost between 1.38 and 1.40 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for May 01 is 1.4518.
This week the sentiment among the Dukascopy Community members has become neutral, since now as many as 50% of all votes are bullish. The average expectation for Feb 9 stays around the 1.43 level.
According to Jignesh, "the FED's meeting last week did not give a signal for a March rate hike." As a result, "USD strength may be limited, as the GBPUSD ranges in an area that can be viewed as multi decade support." Jignesh considers "the downside limited, as long-term speculators receive good risk to reward from this area."
In the meantime, while commenting his forecast, babanu noted that "we had similar action for the Cable as we had for the EUR/USD pair. Price opened below the weekly pivot but broke it with ease, and on the last day of the week it gave up about 240 pips." Community members reckons that "for the next week we have weekly pivot at 1.4265, so if this holds, we might see the big round number at 1.40."