- The share of purchase orders increased from 37 to 52%
- 56% of all open positions are long
- The nearest resistance is located around 1.4415
- Immediate support rests circa 1.4215
- 63% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: MPC Member Haldane Speech, US Labor Market Conditions Index, FOMC Members Brainard and Fischer Speeches, US Consumer Credit, BoE Governor Carney Speech
The British currency experienced mixed performance on Friday and over the weekend, mostly sustaining losses against commodity-based currencies. The Sterling suffered the most against the Kiwi and the Aussie, dropping 0.93% and 0.78% lower, respectively. An increase in oil prices was the main gauge of such an increase in commodity currency prices, however, the Pound edged only 0.29% lower against the Loonie. Meanwhile, the EUR/GBP remained relatively unchanged, inching up 0.08%, whereas the British Pound managed to add mild gains of 0.41% against the Yen, 0.38% versus the Swissie and 0.36% against the US Dollar.
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.
Relatively quiet Monday
There are no significant economic data releases both from the UK and the US on Monday or on Tuesday. However, what is likely to cause some volatility is the US Consumer Credit Change. The Consumer Credit is released by the Board of Governors of the Federal Reserve and is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means.
GBP/USD risks falling back under 1.42
Despite weak UK data, the GBP/USD currency pair managed to recover from its daily low and end the week with five consecutive rallies. If the Sterling succeeds in preserving its current bullish trend, the exchange rate could reach the 1.49 mark within two months; however, technical studies in all timeframes suggest otherwise. Meanwhile, the closest resistance is located only around 1.4415, represented by the 55-day SMA, the weekly and the monthly R1s. The 20-day SMA, on the other hand, is supporting the Cable just below the opening price, while another strong cluster is located around 1.4125, which should limit the dips, as price is expected to drop lower over the day.
Daily chart
The Sterling's bullish momentum was somewhat limited by the resistance line around 1.4240, as it is seen on the hourly chart. The GBP/USD currency pair is now struggling to maintain trade above the 1.42 major level. As a result, the decline in the upcoming days could extend towards the 1.40 mark, where the 200-hour SMA rests, unless sufficient impetus is provided to breach the down-trend.
Hourly chart
Three brokers - three sentiments
Today 56% of all open positions are long (previously 52%), whereas the share of purchase orders increased from 37 to 52% over the weekend.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 55% of them are long, compared to 56% on Friday. At the same time, among Saxo Bank traders bears took over the majority: 53% of their open positions are short and the other 47% are long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (63%) 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 1.48-1.50 dollars in three months, chosen by 15% of the surveyed. At the same time, the mean forecast for June 7 is 1.4327.