- The number of buy orders takes up 55% of the market
- 63% of traders hold long positions
- The main short-term support lies around 1.3930
- Resistance is at 1.4091, namely the weekly S2
- 59% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: US Preliminary GDP, US Core PCE Price Index, US Goods Trade Balance, US Personal Spending and Income, US Revised UoM Consumer Sentiment, FOMC Members Brainard and Powell Speeches
With the UK GDP figures falling in line with expectations yesterday, the British currency was able to post gains against most of other major peers. The only exceptions were the commodity currencies. The Sterling lost 1.01% against the Loonie, 0.73% versus the Kiwi and 0.30% against the Aussie. At the same time, with the improvement of risk sentiment, the Pound managed to add 0.98% against the Japanese Yen, while gained only 0.21%, 0.25% and 0.40% versus the Euro, the Buck and the Swissie, respectively.
The UK economy slowed sharply last year, but managed to recover modestly in the final quarter of 2015. Britain's gross domestic product rose 2.2% last year, compared with the 2.9% growth in 2014, the Office for National Statistics reported. In the three months through December, the economy grew 0.5%, compared with the third quarter, when economic output increased 0.4%. The UK was the second fastest growing major economy in 2015. Among the G7 nations only the US showing a stronger performance with growth of 2.4%. According to the ONS, trade made a negative contribution to the UK growth in the December quarter. Furthermore, business investment fell in the fourth quarter, signalling a slackening of activity. Business investment in volume terms dropped 2.1% in the fourth quarter. On an annual basis, the measure advanced 4.7%, the largest increase since 2010. The services sector was again the only upward driver of the nation's economic growth. The Index of Services rose 0.7% in the reported period.
In January, Chancellor George Osborne said that the UK economy was facing a "dangerous cocktail" of risks this year, ranging from slowing economic growth to volatile equity markets and the ongoing plunge in oil prices. The IMF said that the economic performance of the UK had been "strong", but warned that the referendum on EU membership was a "risk and uncertainty".
This time focus shifts to US GDP
No significant economic data releases from the UK are scheduled for today, leaving us to focus on data from the US, namely the US GDP, the Goods Trade Balance, Personal Spending and etc. The most important event is the GDP release; the Gross Domestic Product Annualized is released by the US Bureau of Economic Analysis and shows the monetary value of all the goods, services and structures produced within a country in a given period of time. GDP Annualized is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. GDP growth is forecasted to slow down, thus, a weaker-than-expected figure could weaken the Greenback dramatically. However, in other fundamentals improvements are anticipated, nullifying a possible negative reaction of the GDP figures.
GBP/USD in limbo ahead of US GDP
The Cable's volatility was contained by the 1.39 level from the downside and the 1.40 level from the upside, as the pair reacted on fundamental data. The Sterling managed to climb over the immediate resistance, which is now providing rather strong support around 1.3930. Although we could se a rally beyond 1.4050, with the closest resistance located at 1.4091, risks of falling back and under the 1.39 mark persist. Near-term technical studies are unable to give any clear sense of direction, but the weekly and the monthly ones retain their bearish signals.
Daily chart
There was no significant movement on Thursday, the Cable remained relatively flat. The 1.39 major level, however, was put the test again, but succeeded in providing support. We might see the level retested again today, whereas the 200-hour SMA around 1.4175 should limit the gains.
Hourly chart
Three brokers - three sentiments
Today 63% of traders hold long positions (previously 65%). Meanwhile, the number of buy orders takes up 55% of the market.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 63% of them are long, compared to 59% on Thursday. At the same time, among Saxo Bank traders bulls remain in the majority: 52% of their open positions are long and the other 48% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (59%) 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 16% of the voters, namely the 1.36-1.38 one, while the second most popular choice implies that the Pound is to cost between 1.40 and 1.42 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for May 26 is 1.4368.
Dukascopy Community members are almost equally divided on the nearest future development of this currency pair. The median forecast is located slightly below the 1.44 mark for Friday of this week.
On the bullish side of the barricade a member of the Dukascopy Community, Besim76, mentioned that the GBP/USD dipped 0.70% ahead of a Brexit decision to trade at 1.4405. "A deal was reached late on Friday which could keep the UK in the Eurozone," he mentioned, adding that the deal makes clear that internal market will be expanded to include services.
Meanwhile, another trader Pisakjanos has a bearish perspective towards the Cable. "I suppose that rumours about the Brexit will circulate and create chaos," he shared his view concerning this week's possible outcome.