- The number of sell orders increased from 43 to 56%
- 54% of all open positions are now long
- The weekly PP at 1.4467 is the main short-term resistance
- Support is around 1.4340, namely the monthly PP, the Bollinger band and the up-trend
- 53% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Trade Balance, MPC Member Cunliffe Speech, US JOLTS Job Openings, US Wholesale Inventories
The Sterling begun the week rather poorly, as it suffered notable losses against most major peers. The GBP/JPY dropped the most, sustaining a 1.34% loss, followed by significant losses of 0.93%, 0.79% and 0.75% against the Swissie, the Aussie and the Euro, respectively. Meanwhile, the Cable edged 0.48% lower, while the Pound weakened 0.42% versus both the Kiwi and the Loonie.
The US labour market started the year on a weaker footing, the Fed's comprehensive measure showed. The Labor Market Conditions Index dropped to 0.4 points in January after a revised 2.3 points in December, reaching the lowest reading since April 2015. The indicator averaged 1.9 points in all of last year, compared with 5.2 points in 2014. The January labour market report confirmed a slowdown in job creation after a rapid growth late in 2015 amid unusually warm weather. Rising wages and the unemployment rate at an eight-year low signalled the labour market recovery remains strong. Non-farm payrolls rose by 151,000 jobs last month, missing expectations for a 190,000 gain and following 292,000 new jobs created in December. Yet, it appeared to be enough to push the US jobless rate to 4.9%, down from 5.0%, the Labor Department reported. In January, all the employment gains were in the private sector, which added 158,000 jobs. The services sector dominated the payrolls increase last month, with 118,000 jobs created. In addition to that, average weekly earnings increased 12 cents an hour or 0.5% on a monthly basis, translating into a 2.5% annualized gain.
Until recently, wage growth has been the one factor missing from America's recovery from the recession. As the unemployment rate remains low, many economists expect Americans to see paychecks increase. Fed Chair Janet Yellen is due to reveal a detailed assessment of economic trends this week when she delivers the semi-annual monetary policy report to Congress.
UK Trade Balance and US JOLTS Job Openings
Today the only relevant economic data release concerning the UK economy is the UK Trade Balance. It is released by the National Statistics and is a balance between exports and imports of goods. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP. If a steady demand in exchange for UK exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the GBP. Furthermore, the US JOLTS Job Openings are also due on Tuesday, it is the number of job openings during the reported month, with exception of the farming industry. According to the forecasts, improvements are expected only in the UK data, but with the overall situation the impact on the Cable is likely to be limited.
GBP/USD: bullish trend intact
The British currency extended its decline against the US Dollar on Monday, but with trade closing above the expected 1.44 level. The Cable has been trading in a bullish trend for three weeks straight, although the up-trend might be put to the test today. Nonetheless, the monthly PP and the 20-day SMA are bolstering the support line and should limit the losses around 1.4340. Meanwhile, the role of the closest resistance was taken by the weekly PP at 1.4467, but the GBP/USD weakness remains the anticipated outcome.
Daily chart
The GBP/USD currency pair appears to be undergoing a corrective decline since the end of the previous week. Volatility should be limited by the resistance line, which should then cause the pair to bounce back towards the two-week up-trend.
Hourly chart
Three brokers - three sentiments
Bulls and bears broke out of the equilibrium, with 54% of all open positions now being long and the remaining 46% - short. At the same time, the number of sell orders increased from 43 to 56%.
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, 57% of them are long (63% on Monday). At the same time, Saxo Bank traders are net short the currency pair: 61% of open positions are short and 39% are long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.50 in three months
The majority of traders (53%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price interval was selected by 14% of the voters, namely the 1.48-1.50 one, while the second most popular choice implies the Pound is to cost between 1.50 and 1.52 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for May 09 is 1.4483.