- The portion of orders to sell the Sterling decreased from 70 to 63%
- 52% of all open positions are currently long
- The nearest resistance is located around 1.4222
- Immediate support rests circa 1.4155
- 61% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: US Average Hourly Earnings, US Non-Farm Employment Change, US Unemployment Rate, US Trade Balance
The Sterling retained most of its strength from Wednesday, thus, managing to outperform most major currencies on Thursday. With improved risk sentiment, the Pound gained 0.91% against the Yen, while disappointing US fundamentals allowed the Cable to surge 0.71%. Against the Loonie the Pound added 0.62%, but remained relatively unchanged against the remaining two commodity currencies, namely the GBP/NZD and the GBP/AUD dropped 0.02% and 0.07% lower, respectively. The British currency also struggled to appreciate versus the Euro, resulting in a 0.11% loss against it.
Business activity in the UK's dominant services sector, which accounts for 88% of the whole economy, cooled sharply in February amid concerns about global economic slowdown, market turbulence and the possibility of Brexit. The Markit/CIPS services PMI plunged to 52.4 in February, down from 55.6 in the prior month, marking the lowest level since March 2013. The headline measure came in against economists projections of 55.1. Growth of both total business activity and new business were the weakest since March 2013, forcing firms to increase employment at the slowest pace in more than two years. The data followed two similar surveys that track activity in the construction and manufacturing sectors, which also fell well short of expectations. The UK construction PMI for February plunged to a 10-month low, while the manufacturing PMI plummeted to a 34-month low, as economic uncertainty weighs on industrial sector.
Britain's all-sector PMI declined to 52.9 in February, down from 56.1 in the prior month, hitting the lowest level since April 2013. The UK's gross domestic product now looks on track to grow by just 0.3% in the first quarter of 2016, Markit estimated, compared with the 0.5% rate in the final three months of 2015, marking the weakest performance since late 2012.
US Non-Farm Payrolls and Unemployment Rate
The US data is the main event today everyone is focusing on. Among that data most attention is to be paid to the Non-Farm Employment Change figures. The Non-Farm Payrolls are released by the US Department of Labor, which presents the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be excessively volatile. At the same time, the Unemployment Rate is due. It shows the number of unemployed workers divided by the total civilian labor force. If the rate is up, it indicates a lack of expansion within the US economy. It also tends to have a noticeable effect on USD pairs.
GBP/USD endeavours to climb over 1.42
The British Pound appreciated for the fourth consecutive day against the US Dollar yesterday, piercing the immediate resistance around 1.4155. This area is now providing support and could spark a Sterling buying spree, which would then lead to a retake of the 1.42 level and, consequently, to a breach of the nearest resistance, namely the 20-day SMA at 1.4222. However, the main Cable driver today will be the US NFP results, a stronger figure of which could cause the pair to retreat from its one-week high and slump back under 1.41, possibly even putting the weekly PP at 1.4012 to the test.
Daily chart
The Cable successfully prolonged its rally for the fourth time, with momentum slowing down only when the exchange rate approached the 1.42 major level. The pair is now also approaching the resistance line on the hourly chart, which could potentially be retested if bulls manage to push the Sterling higher for the fifth day in a row. At the same time, a drop below 1.40 is doubtful, as that psychological area is reinforced by the 200-hour SMA.
Hourly chart
Three brokers - three sentiments
Bulls are barely outnumbering the bulls, as only 52% of all open positions are currently long (previously 40%). At the same time, the portion of orders to sell the Sterling decreased from 70 to 63%.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 56% of them are long, compared to 57% on Thursday. At the same time, among Saxo Bank traders bears took over the majority: 52% of their open positions are short and the other 48% are long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (61%) 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 19% 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 1.48-1.50 dollars or between 1.40 and 1.42 dollars in three months, both chosen by 15% of the surveyed. At the same time, the mean forecast for June 4 is 1.4332.
This week's participants of Dukascopy quiz became much more bearish on pair's perspectives, as now 71.4% of all votes are short, while the average prediction is located on the weekly pivot point at 1.382.
Among the 29% of traders with a positive outlook towards the Cable, Eco believes that "the pair has already tested the bad news and the strength to rebound".
At the same time, a traders with a negative outlook, namely RacerX, suggests that uncertainty about the UK's upcoming referendum to stay or leave the EU is raising volatility with the Sterling. "Brexit fears are likely to weaken GBP/USD," he commented.