- 52% of orders are set to buy and 48% are set to sell the British Pound
- 51% of open positions are long and 49% are short
- Monthly R1 at 1.4680 is the main short-term resistance
- Support is at 1.45
- 69% of traders reckon GBP/USD will be at 1.48 or lower in three months
- Upcoming events: US Average Hourly Earnings, Non-Farm Payrolls, Unemployment Rate, Trade Balance
Yesterday, the British Pound lost the most against its seven major counterparts. The largest decline was recorded against the Swiss Franc - minus 1.19%, while GBP/USD, where the Sterling fell the least, stayed relatively unchanged - only minus 0.10%.
The Bank of England revised its economic growth forecasts due to a gloomier global outlook. Moreover, the lone policy maker who had voted for a rate hike in recent months unexpectedly changed his mind. The BoE's Monetary Policy Committee had voted 9-0 to keep rates on hold at a record-low 0.5%, where they have stayed for almost seven years. The central bank said sharp plunge in oil prices and equities, and significant risks in emerging economies, weighed on the global outlook, though sturdy domestic demand should ensure the UK growth still remained near its long-run average. The BoE forecast the UK's economy would grow 2.2% this year and 2.3% in 2017, down from 2.5% and 2.6% in predicted in November and barely changed from 2015, when growth disappointed expectations. On top of that, the February Inflation Report lowered the short-term inflation outlook, with CPI at around 0.82% and 1.91% by the end of 2016 and 2017 respectively. The BoE expects inflation to exceed the 2% goal during the first quarter of 2018 for the first time.
Discussing monetary policy tools the central bank has at its disposal, the BoE Governor Mark Carney said that interest rates were not at the lower bound, meaning they could be cut further. However, Carney highlighted that policy makers did not consider negative rates, as monetary policy was pointing in a different direction. Currently the market participants are pricing the first interest rate increase at the turn of 2017-2018.
US job creation to slow down
There are no news related to the economy of the United Kingdom today, and otherwise it would be an overkill after 'Super Thursday'. However, volatility is to be high nevertheless, even though the US Dollar is going to be the only driver of changes in the pair. The main focus is on the non-farm payrolls, which are expected to decrease substantially, from 292K to 190K. On Wednesday, the ADP non-farm employment change was reported to fall from 267K to 205K.
GBP/USD consolidates below monthly R1
GBP/USD is currently retreating from the monthly R1, but the currency pair retains potential to go higher from here. Above 1.4680 dollars the Pound should target the 55-day SMA at 1.4740. If the latter resistance is breached as well, the rally will likely travel up to 1.50, the level where the six-month down-trend is reinforced by the 100-day SMA. Our long-term bias, however, remains bearish, and the negative outlook is strengthened by the weekly and monthly technical indicators mostly pointing south.
Daily chart
In the hourly chart the Cable appears to have broken the support trend-line, and this implies a dip to the 1.45 level. Still, further appreciation of the Sterling is highly likely to continue, at least in the perspective of the next several days.
Hourly chart
Three brokers - three sentiments
The SWFX market sentiment is neutral, being that 51% of open positions are long and 49% are short. A similar situation is observed with the orders: 52% are to buy and 48% are to sell the British Pound.
The clients of the other two brokers seem to have different opinions on GBP/USD. OANDA traders are bullish on the UK currency. Right now, 59% of them are long (60% 24 hours ago). At the same time, Saxo Bank traders are net short the currency pair: 42% of open positions are long and 58% are short.
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."