- The number of orders to sell the Sterling increased from 47 to 54%
- 58% of all open positions are long
- The 20-day SMA forms resistance around 1.4424
- Support is around 1.44, represented by the monthly PP and the 100-day SMA
- 63% of traders reckon GBP/USD will be at 1.44 or higher in three months
- Upcoming events: US Labor Market Conditions Index, UK Goods Trade Balance, FOMC Member Dudley Speech, US JOLTS Job Openings, US Wholesale Inventories
The Sterling experienced mixed performance on Friday and over the weekend, having appreciated against some major peers, but also declined against the others. The largest gain was registered against the Aussie, namely 0.94%, due to the RBA's monetary policy decision. At the same time, lesser gains of 0.29% were seen against the Kiwi, followed by a 0.08% and 0.05% rallies versus the Swissie and the Loonie, respectively. The Pound, however, dropped 0.52% lower against the Yen, 0.40% versus the US Dollar and 0.38% against the European single currency.
The US labour market lost steam in April, as the world's biggest economy created the fewest number of jobs in seven months and Americans dropped out of the labour force, casting doubts on whether the Fed will hike interest rates before the end of the year. According to the Labor Department, non-farm payrolls rose by 160,000 jobs last month as construction employment barely climb and the retail sector shed jobs. That was the smallest gain since September and below the first-quarter average job growth of 200,000. Moreover, employers appeared to add 19,000 fewer jobs in February and March than previously estimated. While the unemployment remained unchanged at 5.0% it came at cost of people dropping out of the labour force. The share of Americans participating in the labour force dropped to 62.8% in April from 63.0% in March. Average hourly earnings of private-sector workers climbed by 8 cents last month, or 0.3%, to $25.53. From a year earlier, wages grew 2.5%, a firmer gain than March's rise, albeit below the 3.0% advance that economists say is needed for inflation to climb to the Fed's 2.0% target.
The Fed has so far refrained from lifting its benchmark interest rate this year, after December's hike. Officials welcomed the labour market's improvement last month, but remain concerned about sluggish economic activity and tepid inflation.
Relatively quiet Monday
There are no economic data releases of significance today, thus all focus should be shifted towards the releases on Tuesday, such as the UK Goods Trade Balance. The Trade Balance, released by the National Statistics, is a balance between exports and imports of goods. A positive value shows a trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP. If a steady demand in exchange for UK exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the GBP. From the US side attention should be paid to the US JOLTS Job Openings. The JOLTS Job Openings are released by the Bureau of Labor Statistics; they are a number of job openings during the reported month, excluding the farming industry. Although it is released late, it could still have an impact on the market, because job openings are a leading indicator of overall employment.
GBP/USD to regain the bullish momentum
Weak US employment data on Friday was insufficient to cause the GBP/USD currency pair to rebound, but, nonetheless, the monthly PP managed to limit the losses at 1.4417. Technical indicators keep giving bullish signals in the short and medium terms, suggesting that a corrective rally is due. Demand around the 1.44 major level, represented by the monthly PP and the 100-day SMA, is likely to prevent the Cable from falling lower. Immediate resistance lies around 1.4424, namely the 20-day SMA, but gains are expected to stretch beyond the 1.4450 mark.
Daily chart
Ever since the GBP/USD currency pair climbed over the February high last week, the bullish momentum has been fading. The Cable keeps edging lower, now 400 pips away from a strong support trend-line, which could be reached within the next two weeks if the Sterling fails to rebound.
Hourly chart
Bulls now in the majority
Today 58% of all open positions are long, compared to 61% on Friday. At the same time, the number of orders to sell the Sterling increased from 47 to 54%.
At OANDA market sentiment reached a perfect equilibrium, as 50%% of their open positions are short, and the remaining 50% are long. Meanwhile, the sentiment at SAXO Bank also close to the equilibrium, with 51% of their traders holding short positions (previously 54%).
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.44 in three months
The majority of traders (63%) 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 (33%) of the voters, namely the 1.44-1.46 one, while the second most popular choice implies that the Sterling is to cost either between 1.42 and 1.44 dollars or between 1.46 and 1.48 dollars in three months, both chosen by 12% of the surveyed. At the same time, the mean forecast for Aug 09 is 1.4452.