- Today 66% of all open positions are long
- The portion of buy orders increased from 53 to 62%
- Main resistance is around 1.4270
- The nearest support is represented by the weekly S1 and the Bollinger band around 1.4265
- 67% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: US Crude Oil Inventories, FOMC Members Mester and Bullard Speeches, FOMC Meeting Minutes
'Brexit' fears continued to weigh on the British currency, causing it to decline against most major peers on Tuesday. The largest loss of 1.62% was registered against the Yen, which in turn was strengthened by the risk-off sentiment yesterday. Another notable loss of 1.01% was seen against the Swiss Franc, followed by a 0.72% decline versus the Buck and 0.67% versus the Euro. Falling oil prices also weighed on commodity currencies, with the Sterling edging 0.34% and 0.27% lower against the Loonie and the Kiwi, respectively. The only rally (0.09%) was detected against the third commodity-based currency, namely the Aussie.
The UK's services sector recovered only slightly in March from a three-year low in February, as worries about the global economy, government spending cuts and the EU membership referendum took their toll on the British economy. The latest Markit/CIPS services PMI climbed to 53.7 last month, up from February's 52.7. Despite the monthly increase, the quarterly PMI remained the weakest since the first quarter of 2013 as new business slowed to the lowest since January 2013. Markit's survey also showed concerns over Brexit continued to derail sentiment among businesses. Services generated new business at the slowest rate since January 2013, and the readings for hiring and business expectations were among the weakest in the past three years.
Combined with readings for manufacturing and construction sectors, Markit said its service PMI pointed to a fall in quarterly economic growth in the first quarter of 2016 to 0.4%, from 0.6% in the final three months of 2015. Government forecasters predict growth to slow to 2.0 % in 2016. Even though economists now expect a slightly slower pace of economic growth this year than was seen at the end of 2015, a robust services sector and buoyant consumer spending are seen shoring up the British economy in the coming quarters.
FOMC Meeting Minutes ahead
Even though there are no significant economic data releases scheduled for today, an important event, namely the FOMC Meeting Minutes, is still likely to have an impact on USD pairs. FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.
GBP/USD poised for more weakness
The British currency experienced a rather sharp sell-off yesterday, edging below the six-week up-trend, with trade closing at 1.4162. The Sterling risks falling deeper down today, depending on the FOMC meeting results. Technically, a drop beyond the 1.41 psychological level is unlikely to occur. The weekly S1 and the Bollinger band also form a strong demand area around 1.4070, in case bears pull the exchange rate further down. According to technical indicators, the Pound has the potential to negate some of Tuesday's losses, while the resistance cluster around 1.4270 is to prevent the Cable from appreciating if the bullish momentum prevails.
Daily chart
The GBP/USD pair edged lower yesterday and, therefore, breached the new possible support line. However, a new pattern emerged, namely the falling wedge, which implies a breakout to the upside. There is now a good chance the Cable will rebound from the wedge's lower border and climb over the 1.42 level with a breakout.
Hourly chart
Sentiment turns bullish
Today 66% of all open positions are long (previously 69%), whereas the portion of buy orders increased again, namely from 53 to 62%.
Concerning the sentiment of other market participants, OANDA now has a largely neutral outlook towards the Cable, as 51% of their open positions are short and the remaining 49% are long. Meanwhile, the sentiment at Saxo Bank improved over the day, with 53% of all open positions now being short, compared to 45% on Tuesday.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (67%) 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 17% of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Pound is to cost between 1.38 and 1.40 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for July 06 is 1.4197.
This week traders' expectations worsened even more, with 60% of Dukascopy Community members predicting the pair to lose. Alongside, the average forecast for the end of the week is placed around the 1.413 level.
This time nuonrg believes that the Sterling is to outperform the US Dollar by week's end. "Taking the shape of the daily market, this can be the inverse pattern to look for. It can retest the ranging 38.2 fib again", he commented.
Meanwhile, Besim76, another trader with the Dukascopy Community, retains a negative outlook towards the Cable. He mentioned that "the GBP/USD gained just 0.57% this week to trade at 1.4224 seeing an annual fall of 3.49% as Brexit continues to weigh on the currency. Although GDP beat forecasts recently manufacturing data was a bit weaker. The UK outlook is being dominated by the build up to the June 23rd referendum on whether the UK should leave the EU or Brexit for short."