- The share of buy orders surged from 44 to 49%
- 57% of all positions are now long
- The Bollinger band around 1.4618 is the main short-term resistance
- Support is at 1.4467, namely the weekly PP
- 52% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Manufacturing and Industrial Productions, UK NIESR GDP Estimate, US Crude Oil Inventories, Fed Chair Yellen Testimony, US Federal Budget Balance
The British currency mostly ignored positive fundamental data on Tuesday, as it sustained losses against most major peers. The Sterling dropped 1.16% against the Swiss Franc, while disappointment in German Industrial Production allowed the Euro to add only 0.61% against the Pound. Another noticeable decline of 0.37% was seen against the Yen, while the smallest loss of 0.14% was registered against the Canadian Dollar. Nonetheless, the Sterling was able to outperform the remaining commodity currencies, surging 0.50% versus the Aussie and 0.17% versus the Kiwi. The Cable was also among the well-performing pairs, having climbed 0.27% higher on Tuesday.
The UK retail spending growth hit the highest level in four month in January, as consumers bought more big-ticket items like furniture. The British Retail Consortium reported retail sales values jumped 3.3% last month compared with a year ago, up from a 1.0% gain in December. Furniture and home appliances were the top performers, while discounts in the New Year sales boosted clothing and footwear sales. The report added to signs that Britons continued to spend freely, despite a gloomier global economic outlook. The Bank of England revised down its short-term outlook for both inflation and economic growth, referring to external and domestic headwinds as well as low price pressures and the major factors weighing down on the UK economy and production.
A separate report showed Britain's trade deficit widened in the final quarter of 2015 amid global market turmoil and a slowdown in emerging markets that hurt British exports. The gap between exports and imports increased from 8.6 billion pounds in the September quarter to 10.4 billion pounds, sparking concerns that UK's worsening trading position would be a drag on the economy's growth this year. Moreover, the UK's goods trade shortfall with the rest of the world widened by 1.9 billion pounds to a record high of 125 billion pounds in 2015. However, 2015 saw a record surplus in the UK's dominant services sector of 90 billion pounds.
NIESR GDP Estimate and Yellen's Testimony
A number of important economic events are scheduled for today. First of all, concerning the UK the Manufacturing Production and the NIESR GDP Estimate are the events to pay the most attention to. The Manufacturing Production is released by the National Statistics measures the manufacturing output. Manufacturing Production is significant as a short-term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP. A rather serious rebound is expected, which is also likely to provide insight on the GDP Estimate. The GDP Estimate is an estimate of growth over the last 3 months up to the report which comes out a month before the official announcement. The report is highly reliable and would influence the UK monetary policy. Concerning the US, the most anticipated even this week is the Fed Goevernor's Testimony, where Janet Yellen will announce the economic conditions in the country. Afterwards, the Financial Services Committee will be able to ask additional questions, answers to which tend to cause high volatility and could cause the USD crosses to erase previous intraday gains or losses.
GBP/USD enjoys quiet trade ahead of fundamental data
On Tuesday demand at the immediate support cluster triggered a buying spree of the Cable, causing the pair to recover and stabilise just above the closest resistance level. Technical indicators now shifted to the bullish side, suggesting the bullish momentum is to be prolonged today. The Sterling has the potential to reach the 1.46 major level and encounter resistance in face of the Bollinger band around 1.4618. However, risks of the GBP/USD retesting the support trend-line circa 1.4350 also persist, depending on Yellen's testimony later today.
Daily chart
The hourly chart shows the GBP/USD exceeding expectations and edging above the resistance line on Tuesday. Even though the pair seems to be extending its bullish momentum, there is still room for a decline towards the 1.43 major level – where the two-and-a-half-week up-trend is located.
Hourly chart
Three brokers - three sentiments
Confidence in the Pound keeps rising, with 57% of all positions now being long, whereas the share of buy orders surged from 44 to 49%.
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, 64% of them are long (57% on Tuesday). At the same time, Saxo Bank traders are net short the currency pair: 60% of open positions are short and 40% are long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.50 in three months
The majority of traders (52%) 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 either between 1.46 and 1.48 dollars or between 1.50 and 1.52 dollars in three months, both chosen by 12% of the surveyed. At the same time, the mean forecast for May 10 is 1.4484.
Two thirds of traders who participated in our Dukascopy weekly quiz estimate GBP/USD to go up, while the average forecast stands above 1.46.
Among the two thirds of traders who have a bullish outlook towards the Cable, mutsi believes the "GBP marked a reversal and intraday trend is negative in the growing consolidation phase to test 1.4480." He believes that "support should provide the basis for a new growth to 1.4790."
However, on the bearish side jhinopena suggests that "the pair will start trading within the range mentioned [1.409-1.47]." In his opinion, since it is currently in the upper side of the range, it will go to test the lower boundary.