- The number of orders to acquire the Cable dropped from 56 to 43%
- There are now 52% of short open positions
- Main resistance is the weekly R1 at 1.4393
- The nearest supports are the weekly PP, the 20 and the 55-day SMAs around 1.4250
- 58% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: US ADP Non-Farm Employment Change, US Crude Oil Inventories, GfK Consumer Confidence
The Sterling remained mostly unchanged against other major currencies, with exception against the US Dollar and the New Zealand Dollar. The GBP/USD pair edged 0.91% higher over the day, with the rally triggered by Fed Yellen's dovish statement. Other gains of 0.25% and 0.18% were seen against the Yen and the Swiss Franc, respectively, while the Pound remained relatively unchanged against the Euro, adding 0.06%, and the Loonie, adding 0.05%. At the same time, the British Pound sustained losses against two commodity currencies, namely 0.19% against the Aussie and 0.96% versus the Kiwi.
Fed Chair Janet Yellen insisted on a slower path and more cautious approach to interest rate hikes amid global economic and financial uncertainties, which pose risks to the world's number one economy. In her comments, Yellen said inflation has not yet proven durable against the backdrop of still low oil prices and concerns over China. However, Yellen expected headwinds from slowdown abroad, low oil prices and uncertainty over China to wane and allow the US economy to continue recovering and justify gradual series of rate hikes. Fed policy makers kept interest rates on hold at their March 15-16 meeting and sharply reduced their projected path of interest rate increases this year, foreseeing a total rise of half a percentage point, down from the full percentage point hike they expected in December.
Meanwhile, US consumer confidence recovered in March, as Americans turned positive about the short-term outlook for the US economy. The Conference Board's index of consumer confidence climbed to 96.2 in March from an upwardly revised 94.0 in the prior month. ADP private payrolls report later in the sessions is expected to show that 200,000 positions were added in March, compared with the 205,000 projected for the government's nonfarm payrolls Friday.
US ADP Non-Farm Employment Change and UK Gfk Consumer Confidence
Wednesday is also rather quiet in terms of data, with only two relevant events scheduled for the day. The first one will be the US ADP Non-Farm Employment Change. The Employment Change, released by the Automatic Data Processing, Inc, is a measure of the change in the number of employed people in the US. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth. This is likely to be the main driver for the pair today, despite the UK Gfk Consumer Confidence scheduled to be released closer to day's end. The GfK Group Consumer Confidence is a leading index that measures the level of consumer confidence in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn.
GBP/USD attempts to climb over 1.44
On Tuesday the British currency gained 130 pips against the US Dollar, surging due to Fed Yellen's dovish statement. Sufficient supply in face of the weekly R1 caused the Cable to close trade just under the 1.44 major level, but the GBP/USD currency pair now has the potential to edge higher. In case the weekly R1 is breached, the next target will be the monthly R1 and the Bollinger band around 1.4465. However, technical studies retain their mixed signals, suggesting that a possibility of the Sterling retreating towards the 1.43 mark persists, with the 20 and 55-day SMAs preventing the Pound from falling deeper down.
Daily chart
The Sterling managed to prolong its bullish momentum yesterday, now aiming to reach the resistance line closer to the 1.50 level. However, there are several obstacles on the Cable's path, the first one being the Feb high at 1.4668. Once this target is reached and no rebound occurs, the pair is then expected to put an eight-month down-trend to the test.
Hourly chart
Sentiment turns bearish
Bulls gave in today, as there are now 48% of open positions, compared to 63% on Tuesday. At the same time, the number of orders to acquire the Cable dropped from 56 to 43%.
Concerning the sentiment of other market participants, OANDA still has a bullish sentiment of 61%, compared to 62% on Tuesday, opposed to our now bearish sentiment. Meanwhile, the sentiment at Saxo Bank reached an almsot perfect equilibrium, but bears are still slightly outnumbering the bulls
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (58%) 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 19% of the voters, namely the 1.38-1.40 one, while the second most popular choice implies that the Pound is to cost between 1.46 and 1.48 dollars in three months, chosen by 11% of the surveyed. At the same time, the mean forecast for June 30 is 1.4256.
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 1.41, slightly changed from the last week's closing price. The majority of those polled (53%) share a bearish outlook for the UK currency.
Among the traders with a positive outlook towards the GBP/USD currency pair, Jignesh commented that the Cable here can be tricky. "The pair is bouncing off major monthly and yearly support levels from 1.38 and looks bullish from there, but at the same time recently made a strong breakdown of a 4h up channel indicating bearish pressure," he backed his view. Jignesh also added that "Brexit fundamentals continue to put pressure on the pair. Expecting a volatile week ahead, with a slight bullish bias as a result of a weak USD."
At the same time, Besim, a trader with a bearish perspective towards the Cable, mentioned that "the GBP/USD continued to decline as the greenback gained. The Fed inspired rally as well as terrorism in Europe weakened the pound as it increased the possibility of Brexit over immigration issues. The pound is trading at 1.4114" in support of his outlook.