- Sell orders are outnumbering the purchase ones by four percentage points
- 54% of all open positions are short
- The nearest resistance is around 1.4715
- Support is at 1.4668, represented by weekly R1
- 57% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Second Estimate GDP, UK Preliminary Business Investment, US Durable and Core Durable Goods Orders, US Jobless Claims, US Pending Home Sales, FOMC Member Powell Speech
Risk appetite caused the Sterling to appreciate the most against the safe-haven Yen, with the pair adding 0.60%, while the Pound also managed to outperform most of major currencies yesterday. The British currency also gained 0.42% versus both the Kiwi and the Greenback, while having surged only 0.29% against the European single currency, followed by a 0.22% rally versus the Australian Dollar and 0.21% against the Swiss Franc. Nevertheless, the Sterling suffered a decline against one major currency, namely against the Loonie, due to the Bank of Canada leaving its overnight rate unchanged at 0.5%.
Bank of England Governor Mark Carney defended the central bank's decision to highlight the risks of exiting the European Union, coming under renewed accusation from a lawmaker, who has been attacking Carney brutally on his role in the Brexit debate. Carney said the BoE sees Brexit as the biggest domestic risk to financial stability, and agreed that Brexit could cause the Pound to fall, creating an upside shock to inflation that would make it harder to keep interest rates low. The Governor said that if the UK stays in the EU, the next move in interest rates would probably be up. However, if Britons vote to leave the EU, there is a lower chance of a hike. Deputy Governor Ben Broadbent pointed out that the UK economy appears to have slowed quite sharply this year, while it is unclear how much of the slowdown was °triggered by the Brexit concerns. Jacob Rees-Mogg, a eurosceptic lawmaker, who has previously blamed Carney of venturing into politics with his Brexit warnings and urged him to resign, kept up his criticism. At the same time Andrew Tyrie, chairman of the committee quizzing Carney and other BoE officials, said lawmakers would have criticized the Governor if he had stayed silent on Brexit.
Prime Minister David Cameron and finance minister George Osborne are leading the campaign to keep the country in the EU. The finance ministry has issued similar warning to Carney.
UK GDP Second Estimate and US Durable and Core Durable Goods Orders
Concerning the UK data the most important one is the UK Second Estimate GDP. GDP shows the change in the inflation-adjusted value of all goods and services produced by the economy, therefore, it is the broadest measure of economic activity and the primary gauge of economic health. However, this is the GDP Second Estimate and it tends to have a lesser impact than the earliest one, namely the Preliminary GDP. From the US the Durable and Core Durable Goods Orders are due. The Durable Goods Orders are released by the US Census Bureau, they measure the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those products often involve large investments, they are sensitive to the US economic situation. The final figure shows the state of US production activity. The Core Durable Goods Orders, however, exclude the transport sector.
GBP/USD on the edge of breaking the 22-month resistance line
The British Pound once again managed to outperform the US Dollar, reaching the 1.47 major level yesterday, where the Bollinger band coincides with the 22-month down-trend. From the technical point of view, we should see the Cable make a U-turn and end the day in the red zone; however, daily technical indicators suggest that a possibility of a bullish outcome exists. In case of a bullish development gains should be limited by the 200-day SMA around 1.4778, whereas in case of the bearish outcome the main target will be the 1.46 psychological level, which contained yesterday's downside volatility.
Daily chart
With another day of gains the Cable was able to reach the long-term resistance line, which is now on the edge of being completely pierced. In case bulls prevail, the ceiling should be around 1.4780, where another resistance line is located, but the nearly two-year bearish trend is not yet completely broken, thus, a fall at least towards the 1.46 mark is possible.
Hourly chart
Bears now in the majority
Bearish market sentiment returned to its Monday's level of 54%, compared to 56% on Wednesday. At the same time, sell orders are now outnumbering the purchase ones by four percentage points.
At OANDA market sentiment worsened over the day, as bulls and bears reached a perfect equilibrium today, compared to 52% of all open positions being short on Wednesday. Meanwhile, the sentiment at SAXO Bank remained unchanged over the day, as bears still take up 61% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (57%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price interval was selected by slightly less than a quarter (22%) of the voters, namely the 1.44-1.46 one, while the second most popular choice implies that the Sterling is to cost between 1.42 and 1.44 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for Aug 26 is 1.4613.
Compared to previous five days, this week Dukascopy traders became more negative on US currency, as more than 60% of all votes are set to sell the Pound. In line with negative statement, the median prediction for May 31 almost crossed the 1.44 mark. The biggest part of forecasts, however, remains even below the 1.44 major level.
Once again this week Pisakjanos remains bullish on the GBP/USD currency pair, suggesting that the bullish trend is to prevail. "The bullish trend to be continued with major oscillations," he commented.
However, according to nuonrg, the Sterling is to weaken against the Buck by week's end. "The pair made a fast run into daily 200 SMA resistance area. Brexit scenario is still in play. A channel is shaping up fresher, targeting the low area of that zone," he backed his view.