- There is no real difference between the numbers of buy and sell orders
- 47% of market participants are long and 53% are short
- Bullish target is the May high at 1.4770
- 200-hour SMA keeps providing strong support
- 54% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: US Chicago PMI (May), CB Consumer Confidence (May), Personal Spending (Apr), Core PCE Price Index (Apr)
The Sterling was mostly appreciating yesterday, but gains were limited by a small amount of fundamental releases, while losses did not exceed 0.2%. Nevertheless, the most significant change was recorded against the Japanese Yen, which still managed to weaken as much as 0.77% on a possible sales tax hike delay.
British economic growth lost steam in the first quarter on the background of unexpected contraction in business investment. The second reading of Britain's first-quarter GDP figures confirmed the loss of momentum in the economic recovery. The Office of National Statistics announced that the economy grew 0.4% in the first quarter, slower than the 0.6% pace in the last three months of 2015, the same as the first estimate given in April. From a year earlier GDP expanded 2%, which was revised down from last month's first reading of 2.1%, the ONS said. Moreover, business investment missed with a fall of 0.5% against 3.2% expected. Also the BBA's mortgage approvals did not meet expectations by sliding to 40.1K against 44.8K predicted.
In addition, a separate report showed that out of the four main components on the output side of GDP, production and construction contracted from the previous quarter, while agriculture and services activity increased, according to a breakdown of the first quarter's reading. Production shrank 0.4% and construction fell by 1%, the ONS said. Manufacturing, the largest component within production, dropped 0.4%. Services, which account for a massive 79% of GDP, increased 0.6%, posting a 13th consecutive quarter of growth. The expansion was less than the fourth quarter's 0.8% pace.
US consumer confidence to improve
Yesterday's quite trade should not continue today with the help of the consumer confidence report published by the Conference Board. It is expected that the sentiment will improve from 94.2 to 96.1. Nevertheless, we should note that the currency pair remains extremely sensitive to any information regarding the possibility of the UK leaving European Union, as observed last Friday. An additional catalyst for GBP/USD to move will appear tomorrow, as UK and US manufacturing PMIs will have a good chance of shaking up the markets.
GBP/USD finds support at 1.46
As expected, the technical indicators turned out to be correct, and the Cable recovered from the weekly pivot point, even though there are massive resistances just overhead. The nearest one is the 200-day SMA at 1.4770/60, which is reinforced by the weekly R1 and May high. It is followed by a 23-month down-trend at 1.4850. Accordingly, while there still remains some room for Pound's appreciation during the next several days, we do not expect a sustainable rally above 1.48 without such a catalyst as the UK staying in the European Union.
Daily chart
As for the shorter-term perspective, the 200-hour SMA managed to withstand the pressure, while the new resistance trend-line was broken, exposing the May high at 1.4770. As a result, there is likely to be a continuation of the rally today, but being long is becoming increasingly risky in view of the resistance levels we are closing in.
Hourly chart
Traders fail to reach consensus
SWFX traders stay undecided with respect to the British Pound. At the moment, 47% of market participants are long and 53% are short the currency. There is also no real difference between the numbers of buy and sell orders set 100 pips around the spot.
There is also no clear difference between the bulls and bears in other markets as well. For example, 54% of OANDA traders are long and 46% of them are short. At the same time, 45% of Saxo Bank traders are long and 55% are short, meaning sentiment is neutral across the board.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (54%) 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 (21%) 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 12% of the surveyed. At the same time, the mean forecast for Aug 27 is 1.4634.