- The number of purchase orders declined from 54 to 45%
- 65% of all open positions are long
- Main resistance is around 1.4215
- The nearest support is represented by the weekly S1 at 1.4081
- 55% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: FOMC Member Dudley Speech, US NAHB Housing Market Index, US Building Permits, US Housing Starts, BoE Governor Carney Speech
The British currency experienced mixed performance on Friday and over the weekend, but still managing to outperform most major currencies. The largest gains of 0.37% and 0.33% were registered against the Swiss Franc and the US Dollar, respectively, followed by a 0.17% rally versus the Euro and 0.15% against the Loonie. The Sterling was not so lucky with its performance against the other two commodity currencies, as a large decline of 0.74% was detected against the New Zealand Dollar, amid a strong reading of the New Zealand CPI. The GBP also dropped 0.27% versus the Yen, but remained relatively unchanged against the Aussie, edging 0.06% lower.
US industrial production declined more than expected in March as output dropped broadly, the latest sign that economic growth faltered in the first quarter. Industrial output fell 0.6% last month following a downwardly revised 0.6% decrease in February, according to the Federal Reserve. Industrial production slipped at an annual rate of 2.2% in the first quarter. The report joined data on retail sales, business spending, trade and wholesale inventories in indicating that economic growth slowed at the turn of the year. Growth estimates for the first quarter are as low as a 0.2% annualized rate. The world's number one economy grew at a 1.4% rate in the fourth quarter. However, given a strong labour market, the slowdown in growth is likely to be temporary.
A separate report showed US consumer confidence unexpectedly declined in early April for the fourth straight month, as concerns about surging gasoline prices and the broader economy weighed on sentiment. The Thomson Reuters/University of Michigan preliminary Consumer Confidence Index slid to 89.7 points in April, compared with the final 91.0 reported in March, when it had dipped to a fresh five-month low. The Current Economic Conditions sub-index ticked down to 105.4, down from 105.6 in March, while the Index of Consumer Expectations plunged to 79.6 in April, sharply lower than 81.5 reported previously.
US NAHB Housing Market Index is the only event to have an impact on the Cable
The only relevant event today is the US NAHB Housing Market Index, which is released by the National Association of Home Builders. It presents home sales and expected home buildings in the future indicating housing market trend in the United States. The growth rate of the housing market affects the USD volatility. However, tomorrow attention should be paid to the US Building Permits. The Building Permits, released by the US Census Bureau, at the Department of Commerce, shows the number of permits for new construction projects. It implies the movement of corporate investments (US economic development). It tends to cause some volatility to the USD.
GBP/USD remains subject to weakness
Last Friday that British Pound managed to rebound against the US Dollar, completely erasing the preceding day's losses. Nevertheless, the Cable remains within the borders of a falling wedge pattern, thus, more bearish momentum is likely to come. A tough resistance cluster is weighing of the GBP/USD pair today, namely the 20-day SMA and the weekly PP around 1.4215. At the same time, the wedge's upper border is located close by, in case bulls succeed in pushing the Sterling higher today. However, technical indicators are in favour of the bearish scenario, but the nearest support rests only at 1.4081 in face of the weekly S1.
Daily chart
The GBP/USD currency pair's volatility is contained by two trend-lines, which in turn form a falling wedge. Such pattern is usually followed by a breakout to the upside, but prior to that another confirmation of the support line is expected.
Hourly chart
Sentiment remains bullish
Today 65% of all open positions are long (previously 64%), whereas the number of purchase orders declined from 54 to 45%.
Concerning the sentiment of other market participants, OANDA once again has a positive outlook towards the Cable, as 54% of their open positions are long, unchanged since Friday. Meanwhile, the sentiment at Saxo Bank remains close equilibrium, with 51% of all open positions now being long and the remaining 49% being short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (55%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The two most popular price intervals were selected by 32% of the voters (equally divided), namely the 1.44-1.46 and 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 18 is 1.4243.