- The share of buy orders increased from 58 to 59%
- SWFX traders' sentiment is bullish at 63%
- The main short-term support lies around 1.38
- Resistance is at 1.4012, namely the monthly PP
- 60% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Manufacturing PMI, US ISM Manufacturing PMI, US Construction Spending
The Sterling posted gains against most of other major currencies at the beginning of the week, with exception against the Yen. The Pound dropped 0.87% lower against the Yen, as demand for safe haven currencies was higher. The British currency managed to add 0.91% against both the Kiwi and the Euro, while other solid gains of 0.51% and 0.53% were registered versus the Swiss Franc and the Canadian Dollar, respectively. Meanwhile, the Cable surged 0.33%, but the GBP/AUD remained relatively unchanged, edging 0.12% higher.
Mortgage approvals in the UK reached the highest level in two years in January, while consumer credit rose at the quickest pace in a decade, according to the Bank of England. Mortgage approvals for house purchases increased to 74,581 last month from 71,335 in December. At the same time, consumer credit surged by 9.1% year-on-year in January, the highest since January 2006. The number of mortgage approvals increased throughout 2015, following a decline in the previous year when tougher checks on mortgage borrowers were introduced.
Britain's economic recovery is still heavily dependent on spending by households, many of which have been boyed by strong growth in the value of their homes. The central bank said it may raise the amount of money banks are required to put aside to cover their lending as the economy continues to recover from the financial crisis. The recent data from Rightmove showed the average asking price of property in the UK increased 2.9% in January, hitting another record high of 299,287 pounds. The report showed demand increased to record high levels, while the number of new properties coming to market advanced 5% when compared with January last year.
UK and US Manufacturing PMIs
A small number of economic data releases to influence the Cable are due today. Nonetheless, they could still have a serious impact on the Sterling crosses. First of all, the UK Manufacturing PMI is due at 9:30 am GMT, which is released by both the Chartered Institute of Purchasing & Supply and the Markit Economics. It captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in UK. Later today the US Manufacturing PMIs are due, one is released by the Markit Economics, while the second one by the Institute of Supply Management. The UK Manufacturing PMI is forecasted to worsen, while the US ones to improve, thus, likely weighing on the GBP/USD.
GBP/USD in tight range between 1.38 and 1.40
The British Pound succeeded in outperforming the US currency at the beginning of the week, thus, retaking the 1.39 major level. Today the Cable remains caged between the weekly PP at 1.4012 and the cluster around 1.3750, represented by the Bollinger band and the weekly S1. However, technical studies retain their bearish signals, suggesting that the pair could erase some of yesterday's gains. Nevertheless, there is still room for more than a 90-pip rally towards the nearest resistance, in case the Buck loses significantly more long positions later.
Daily chart
The situation on the hourly chart remains unchanged – the Cable appears to be surging towards the nearest resistance, namely the 200-hour SMA. Although fundamental data could trigger a sell-off earlier, the bullish momentum should last for approximately 100 more pips.
Hourly chart
Three brokers - three sentiments
The percentage of Sterling long positions open in the SWFX market keeps oscillating between 63% and 65%, with the lowest of the two prevailing today. At the same time, the share of buy orders barely changed—increased from 58 to 59%.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 60% of them are long, compared to 63% on Monday. At the same time, among Saxo Bank traders bulls remain in the majority: 53% of their open positions are long and the other 47% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (60%) 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 17% of the voters, namely the 1.36-1.38 one, while the second most popular choice implies that the Pound is to cost either between 1.34-1.36 dollars, or between 1.40-1.42 dollars or even between 1.48 and 1.50 dollars in three months, all three chosen by 13% of the surveyed. At the same time, the mean forecast for May 31 is 1.4307.