- The share of purchase orders inched up from 45 to 47%
- 56% of traders retain a positive outlook towards the Pound
- The main short-term resistance lies around 1.4675
- Support is at 1.4467, namely the weekly PP
- 55% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Construction Output, US Retail and Core Retail Sales, US Import Prices, US Preliminary UoM Consumer Sentiment, FOMC Member Dudley Speech
The British currency declined against other major currencies on Thursday. Fears of a Brexit keep pushing the Sterling lower, as it suffered a 1.12% loss against the Japanese Yen, followed by a rather serious 0.77% decline against the Kiwi and 0.58% versus the Euro. Against commodity-based currencies, the Pound performed the best against the Loonie, but still dropped 0.24%. Versus the Aussie was more than twice heavier, as the GBP/AUD fell 0.50%. Meanwhile, the Cable was not far off, as it slumped 0.31%.
Britain's industrial production dropped more than expected in the fourth quarter as the manufacturing sector continued to drag down the UK's economy. Total production output declined 0.5% in the December quarter, compared with the three month-period ended September. Industrial production plunged 1.1% on month in December as warm winter weather forced a steep decrease in energy output and the low oil price hurt North Sea oil producers. It was pulled down by a 4% plunge in mining and quarrying sector. Manufacturing production, which accounts for around 10% of GDP, contracted 1.7% in 2015 compared with the previous year, remaining 6.5% below the total it reached before the 2008 crisis. Measured on a monthly basis, manufacturing output declined 0.2% in December, compared with analysts' expectations for a 0.1% gain. According to the Office for National Statistics, total production for the whole of 2015 was 1% higher than in the preceding year.
Weak economic data have consistently urged investors to push back the date when they expect the Bank of England to begin hiking interest rates. Market derivative instruments now price in a lift as late as mid-2019. According to the preliminary data of UK gross domestic product, released in January, the UK economy grew 0.5% between October and December, faster than the third quarter's 0.4% rate of growth.
Focus shifts to US data
The most important economic data releases today concern the US economy, namely the Retail and the Core Retail Sales. Both are released by the US Census Bureau and show the monthly data of all goods sold by retailers. The Core Retail Sales, however, exclude automobile sales. The Retail Sales sector index is often taken as an indicators of consumer confidence. Figures in both releases are expected to rebound from the previous negative results. Furthermore, later today the Reuters/Michigan Consumer Sentiment Index is due. The Reuters/Michigan Consumer Sentiment Index is released by the Reuters/University of Michigan and is conducted from a survey of personal consumer confidence in economic activity. It shows a picture of whether or not consumers are willing to spend money. Since the Consumer Sentiment is a leading indicator of Consumer Spending, it should have a considerable impact on the market.
GBP/USD endeavours to climb higher
The Cable took another shot at the monthly PP yesterday and, as a result, retreated from intraday losses, closing at 1.4480. Although the weekly pivot point is providing immediate support for the pair, we might still see the cluster just below the 1.44 level get retested, as weekly technical indicators retain their bearish signals. At the same time, if US data disappoints today, the GBP/USD currency pair is likely to end the week higher, with Thursday's losses completely erased. The nearest resistance is formed by a group of technical levels around 1.4670, thus, remaining out of reach.
Daily chart
The bearish trend's line, established last Thursday, appears to be preventing the GBP/USD from appreciating. As a result, the retest of the down-trend is likely to send the Cable down again, unless the US fundamentals weaken their domestic currency and cause the resistance to be breached.
Hourly chart
Three brokers - three sentiments
Today 56% of traders retain a positive outlook towards the Pound. Meanwhile, the share of purchase orders inched up from 45 to 47%.
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, 63% of them are long, unchanged since yesterday. 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 1.46 in three months
The majority of traders (55%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price intervals were each selected by 11% of the voters, namely the 1.40-1.42, 1.46-1.48 and 1.48-1.50 ones, while the second most popular choice implies the Pound is to cost either between 1.38 and 1.40 dollars or between 1.42 and 1.44 dollars in three months, both chosen by 10% of the surveyed. At the same time, the mean forecast for May 12 is 1.4436.
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.