- 65% of all pending orders are to sell the British Pound
- 54% of traders are short the Sterling
- The weekly R1 forms support around 1.4529
- Resistance is around 1.4630, represented by the monthly R1 and the weekly R2
- 56% of traders reckon GBP/USD will be at 1.44 or higher in three months
- Upcoming events: UK Net Lending to Individuals, UK Mortgage Approvals, MPC Member Cunliffe Speech, US Core PCE Price Index, US Employment Cost Index, US Personal Spending and Income, Chicago PMI, US Revised UoM Consumer Sentiment, US Treasury Currency Report
The British currency remained relatively unchanged against most major peers on Thursday for the second day, with the only severe loss of 2.56% registered against the Japanese Yen, amid the BoJ's unexpected decision to leave monetary policy unchanged. Kiwi's performance on Thursday was also good, as the Sterling sustained a 1.37% loss against it. The Cable, however, edged 0.45% higher due to US GDP growing at a slower pace than anticipated. At the same time, the Pound edged up only 0.19% against the Euro and 0.10% versus the Loonie, while remaining almost completely unchanged against the Aussie and the Swissie, inching up 0.01% and down 0.01%, respectively.
The US economy expanded in the first quarter at the slowest pace in two years due to a sharp pullback in business investment and sluggish global demand. Gross domestic product rose at a 0.5% seasonally adjusted annual rate in the first quarter, according to the Commerce Department. This is the government's first of three estimates for the quarter before annual revisions in July. Consumers and the housing market kept the US economy from sliding backward, albeit only barely. Among the forces working against the US growth in recent months was a lacklustre demand from overseas and a strong Dollar that have led to a decline in exports, subtracting from growth.
After its meeting earlier in the week, the Fed provided a mixed review of the economy, saying in its statement that economic activity had slowed despite labour market improvement. Though the US central bank had entered the year with the plan to hike interest rates several times, it has so far refrained from any moves, a response to overseas volatility, particularly in China, and to the contradicting signals about US economic health. Analysts say the Fed could still decide to raise interest rates at its next meeting in June. The International Monetary Fund, in mid-April, estimated that the US economy would grow by 2.4% this year, slightly better than the pace of other developed economies.
UK Net Lending to Individuals, US Core PCE Price Index, US Personal Spending and Income
Among the events to influence the GBP/USD currency pair today attention should be paid to the UK Net Lending to Individuals. It is released by the Bank of England and is a monthly measure of growth rates, amounts outstanding and changes in total lending to individuals, divided into lending secured on dwellings and consumer credit. It shows a picture of whether or not consumers are willing to spend money. Another event is the US Core Personal Consumption Expenditure. Released by the US Bureau of Economic Analysis, it is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products, such as food and energy, in order to capture an accurate calculation of the expenditures. It is a significant indicator of inflation. Furthermore, the US Personal Spending and Income should also be in focus. The Personal Spending measures purchases of goods and services by households and by non-profit institutions that serve households from private businesses. As for Personal Income, it measures the total income of individuals, received from all sources, including wages and salaries, interest, dividends, rent, workers' compensation, proprietors' earnings and transfer payments. This figure can provide insight on the US employment situation.
GBP/USD sets eye on 1.47
Disappointment in yesterday's US GDP figures caused the Cable to negate Wednesday's losses, but the immediate resistance in face of the monthly PP and the weekly R2 remained intact. The Sterling is expected to retain its strength, thus, edge higher against the US currency again. Gains are likely to be limited around the 1.4660 mark, with resistance there represented by the weekly R2 and the Bollinger band. In case supply fails to keep the GBP/USD pair from appreciating, price should stabilise near the 1.47 major level, only 200 pips away from the final resistance line. Medium-term technical indicators are now giving mixed signals, suggesting that the down-trend could be reached next month.
Daily chart
The Sterling continued to trade within the borders of the possible ascending channel pattern, but the bullish momentum was still insufficient to cause the upper border to be confirmed. The Cable now faces the Feb high of 1.4668, which might cause a downside breakout or open the door for further appreciation towards 1.49.
Hourly chart
Sentiment at perfect equilibrium
There are 54% of traders being short the Sterling today, the majority of all pending orders, namely 65%, are to sell the British Pound.
At OANDA market sentiment is close to the equilibrium, with only 51% of their open positions being long, one percentage point less from Thursday. Meanwhile, the sentiment at SAXO Bank remains bearish, with 63% of their traders holding short positions (previously 59%).
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.44 in three months
The majority of traders (56%) believe the British currency is to cost 1.44 or more dollars after a three-month period. The most popular price interval was selected by slightly more than a quarter (26%) of the voters, namely the 1.44-1.46 one, while the second most popular choice implies that the Sterling is to cost between 1.46 and 1.48 dollars in three months, chosen by 17% of the surveyed. At the same time, the mean forecast for July 29 is 1.4333.
Market sentiment is strongly bearish (72%), while attitude towards the Sterling is bearish as well, with the currency being sold in 72% of all cases across the board.
Among the traders with a positive perspective towards the Cable, Trendmaster believes that the GBP/USD has a strong trading uptrend. "Thus, I am expecting the currency pair to remain bullish this week", he commented.
At the same time, Jignesh sticks with the majority, believing the GBP/USD pair is to weaken by week's end. "The GBP remains under some uncertainty without a resolution to Brexit. As the pair approaches previous highs, we are can see sellers coming in to push the pair back into a range that has developed over the past month", he backed his view, also adding that "the area between 4460-4500 will be a significant area for the bears this week to show some pressure."