- The portion of orders to acquire the British Pound increased from 54 to 58%
- Market sentiment remains bullish at 62%
- Main resistances are the weekly S1 and the 20-day SMA around 1.42
- The nearest support are the monthly PP at 1.4141
- 59% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: US Final GDP, US Core PCE Price Index, US Goods Trade Balance, US Personal Spending and Income, US Pending Home Sales
Due to positive UK Retail Sales data, the British Pound appreciated against all other major currencies on Thursday. The largest gains were registered against the Japanese Yen, namely 0.73%, while the other significant rally of 0.60% was registered against the Canadian Dollar. The Pound's performance against other major currencies was mild: gains of 0.30% were registered against all three – the Aussie, the Euro and the Swiss Franc. The Sterling had the most trouble appreciating versus the US Dollar, as some positive US fundamentals prevented the Buck from falling deeper. The cable edged only 0.26% higher.
The UK retail sales declined less than expected in February after increasing the most in more than two years in January due to post-Christmas sales. Retail sales volumes fell 0.4% last month following the 2.3% surge in January, according to the Office for National Statistics. Economists, however, had predicted a 0.7% decline. Compared with a year earlier, sales in February soared 3.8%, slowing from a growth rate of 5.4% in January.
British consumer demand has been sturdy and has supported economic growth over the past couple of years, boosted by record employment, modestly increasing wages and near-zero inflation, all of which have provided households with more disposable income. Last month the BoE predicted household consumption would increase by 2.75% this year, the same as in 2015 and faster than the economy as a whole would expand. However, there have been some signs of a slowdown. Figures from the British Retail Consortium showed annual growth in retail spending decreased to 1.1% in February from 3.3% in the prior month. Moreover, ONS figures showed the value of retail sales rose by 1.4% on the year in February. The ONS said sales in the three months to February had suffered due to the steepest decline in clothing sales since December 1990, which plunged by 3.4%.
US Annualized GDP is the only event to focus on
There is only one relevant economic data release that could have some impact on the GBP/USD pair, namely the US Annualized GDP. The Gross Domestic Product Annualized, released by the US Bureau of Economic Analysis, 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. Any change In the figure, compared to the previous quarters' one, is likely to cause volatility in the US crosses.
GBP/USD risks falling under 1.41
The Cable managed to recover from its intraday low on Thursday, as fundamental data turned into Sterling's favour. However, the acquired momentum was insufficient for the GBP/USD currency pair to retake the 1.42 major level. The weekly S1 and the 20-day SMA keep forming a relatively strong resistance cluster around the 1.42 mark, while the monthly PP is providing immediate support at 1.4141—just under today's opening price. A breach of the monthly PP is likely to cause a decline towards around 1.4050, while the upper target is the 55-day SMA around 1.4286.
Daily chart
The GBP/USD pair now appears to be trading within the borders of a descending channel, with an extra confirmation of the resistance line on the way. Consequently, the exchange rate should bounce back and begin moving towards the 1.40 level, unless US Final GDP data disappoints and provides sufficient impetus for the channel's upper border to be pierced..
Hourly chart
Sentiment turns bearish
Although not as strong as yesterday, but market sentiment remains bullish at 62% (previously 70%). At the same time, the portion of orders to acquire the British Pound increased from 54 to 58%.
A similar but to a lesser extent attitude is observed at OANDA, where 64% of open positions are long, seven percentage points more than yesterday. Meanwhile, the sentiment at Saxo Bank remains bullish, but a lot weaker than on Thursday, being that 52% of all open positions are now long and the remaining 48% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (59%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The most popular price interval was selected by 15% of the voters, namely the 1.38-1.40 one, while the second most popular choice implies that the Pound is to cost between 1.34 and 1.36 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for June 25 is 1.4242.
Community members do not expect any surprises from the currency pair this week, as according to the Dukascopy survey the Sterling might end the week at 1.43, slightly changed from the last week's close price. The majority of those polled (62%) share a bearish outlook for the British currency.
According to nuonrg, a member of the Dukascopy Community, the GBP/USD has the same story as the EUR/USD. "The pair showed much strength during the last week. The downtrend seems to be broken for now while momentum is shifted and needs to be confirmed," he commented.
However, RacerX believes that the Pound could edge lower against the US currency, as "with the possibility of a Brexit still looming on the horizon uncertainty about GBP may cause the market to favor the bearish potential." He also added that "the recent lackluster numbers in addition to the FOMC announcement still point toward positive developments in the US economy."