- The share of buy orders dropped from 65 to 58%
- 64% of traders are long the Pound
- Main resistance is around 1.4270
- The nearest support is represented by the weekly PP at 1.4151
- 56% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: UK CPI, UK PPI, UK RPI, UK HPI, US Import Prices, US Federal Budget Balance
The British Pound started the week by appreciating against most of other major peers, with exception against the New Zealand currency. The Sterling experienced solid gains of 0.85%, 0.79%, 0.75% and 0.65% versus the Swssie, the Greenback, the Euro and the Japanese Yen, respectively. Due to an increase in oil prices, the British currency struggled to outperform the commodity-based currencies. Although the Pound added 0.23% against the Aussie and 0.08% Loonie, whereas the GBP/NZD edged 0.03% lower.
British retail sales declined last month as bad weather undermined demand for clothes, while takings at grocers were hit by lower food prices and Easter closures. According to the British Retail Consortium, like-for-like sales declined 0.7% in March on a year earlier, the biggest decrease since last August. Sales, however, remained flat on year in total terms. A more underlying quarterly gauge showed a 1.4% gain in sales values. Some economists had expected the earlier Easter to boost sales, as it was the case in previous years when people splash out on seasonal foods and gifts. However, the BRC report showed the opposite effect, with pressure on food sales from stores closing on Easter Sunday. Consumer spending has been the main driver of economic growth in Britain in recent months and the March sales lull will fuel concerns the UK economy is losing strength.
The Confederation of British Industries reported last week that retail sales volumes growth slowed slightly in March, with the outlook for the coming month improving as orders placed on suppliers increased above expectations. The UK's official statistics showed sales volumes dropped between January and February less than had been expected. Meanwhile, a quarterly measure showed the retail sector remained on a solid ground in February, showing growth for the 27th straight month, and climbing 0.8% compared with the previous quarter.
UK Inflation Data, US Import Price Index and Monthly Budget Statement
A number of fundamental economic data releases are due today. From the UK inflation data is to be released at 8:30 AM GMT, with the most important one being the CPI. The Consumer Price Index, released by the National Statistics, is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Later today the US Import Price Index is to be released. The Import Price Index, released by the US Department of Labor, informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise. Finally, the US Monthly Budget Statement, which is released by the Financial Management Service, summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD.
GBP/USD risks falling back under 1.42
The Sterling set off with a 125-pip rally against the Buck yesterday, unable to climb over the second tough resistance area. Technically, we should see the Cable bounce back under the 1.42 major level, with the weekly PP now acting as the nearest support at 1.4151. However, today's UK inflation data could provide sufficient impetus for the GBP/USD currency pair to at least partially pierce the immediate resistance, as the four-week down-trend at 1.4290 is expected to hold. Daily technical indicators are still unable to provide any clear sense of direction, whereas the longer timeframe ones still suggest the bearish momentum is to prevail.
Daily chart
The Sterling continued to post solid gains against the US Dollar after breaching the wedge's resistance line. The 200-hour SMA was also unable to limit the gains, but according to the daily chart, the pair faces a strong supply area around yesterday's intraday high, which might cause a setback in the Cable's rally.
Hourly chart
Sentiment remains bullish
Traders remain long the Pound, namely 64% of them (previously 66%). Meanwhile, the share of buy orders dropped from 65 to 58%.
Concerning the sentiment of other market participants, OANDA has a positive outlook towards the Cable, as 61% of their open positions are long, compared to 63% on Monday. Meanwhile, the sentiment at Saxo Bank broke out of the equilibrium, with 54% of all open positions now being short and the remaining 46% being long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (56%) 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 1.46-1.48 ones, 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 16% of the surveyed. At the same time, the mean forecast for July 12 is 1.4259.