GBP/USD struggles to preserve the ascending channel pattern

Source: Dukascopy Bank SA
  • The number of purchase orders increased from 32 to 57%
  • 56% of traders hold long positions
  • The nearest resistance is located around 1.4537
  • The up-trend and the 55-day SMA form support circa 1.4435
  • 53% of traders reckon GBP/USD will be at 1.46 or higher in three months
  • Upcoming events: UK Construction Output, US Preliminary UoM Consumer Sentiment, US Federal Budget Balance
© Dukascopy Bank SA

The British currency experienced mixed performance on Thursday, without any sharp movements registered against most major peers, with exception of the GBP/NZD. The Sterling managed to appreciate 0.38% against the Euro, 0.24% versus the Swissie and 0.22% against the Aussie. Meanwhile, losses of 0.32%, 022% and 0.08% were seen against the Buck, the Japanese Yen and the Loonie, respectively, but the most notable development, which was bearish, was registered against the New Zealand Dollar. The GBP/NZD edged 1.69% to the downside, as the Kiwi retained its post RBNZ strength.

Manufacturing production in the UK advanced further bolstering optimism about the domestic economy. UK manufacturing as well as industrial production data outperformed major economists' expectations in April being mainly influenced by the weaker cable due to upcoming Britain's EU referendum. According to the latest figures released by the Office of National Statistics, manufacturing production skyrocketed 2.3%, against March's 0.1%, and an expected growth of 0%. Industrial production, in turn, jumped by 2% in April, adding 0.3% from March, and far above the 0% reading expected. On a yearly pace, manufacturing production added 0.8%, showing much better results than a forecasts for a 1.5% decline as well as after a steep 1.9% drop in March. Concerning industrial production, this data demonstrated an increase of 2.0% following a gain of 0.3% in the preceding month and in line with forecasts.

Meanwhile, analysts warned that despite such a positive figures which provided a strong boost to the economy, it was still too early to say whether the industrial sector had totally strengthened. Moreover, following data spurred the pound, which currently is suffering upcoming Brexit poll's results.

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Focus turns to US fundamentals



On Friday only two events are expected to have some impact on the GBP/USD pair. First of all, the Reuters/Michigan Consumer Sentiment index, which is a survey of personal consumer confidence in economic activity. It shows a picture of whether or not consumers are willing to spend money. Second, the US Federal Budget Balance, which summarizes the financial activities of federal entities, disbursing officers and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD. On the other hand, a negative figure (deficit) that indicates government debt is seen as bearish.



GBP/USD struggles to preserve the ascending channel pattern

With experiencing another decline on Thursday, the GBP/USD currency pair inched closer to the ascending channel's support line. Technically, we should still see a rebound, as the trend-line is reinforced by the 55-day SMA and managed to provide the Cable with sufficient bullish momentum to keep advancing since March. However, daily technical studies are now giving bearish signals, indicating that a breakout might be imminent. On the other hand, the two-year down-trend has not yet been retested, thus, the immediate support might hold today and eventually cause the Sterling to rebound, leading it back towards the 1.47 major level.

Daily chart

© Dukascopy Bank SA

The Cable keeps having trouble in restoring its bullish trend, as the exchange rate continues to edge closer to the up-trend. A breach of this up-trend would not necessarily imply that more bearish momentum is likely to follow, as a retest of the two-year down-trend is still expected.

Hourly chart

© Dukascopy Bank SA



Bulls and bears remain in balance

There are 56% of traders holding long positions today (previously 52%), while the number of purchase orders increased from 32 to 57%.

Compared to Tuesday, there are also slightly less bulls at OANDA - they take up 54% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is now bearish, as here the number of bears exceeds the number of bulls by 14 percentage points.


Spreads (avg, pip) / Trading volume / Volatility



Majority sees GBP/USD above 1.46 in three months

© Dukascopy Bank SA

The majority of traders (53%) believe the British currency is to cost 1.46 or more dollars after a three-month period. The most popular price interval was selected by slightly less than a fifth (15%) of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Sterling is to cost either between 1.42 and 1.44, or between 1.44 and 1.46, or between 1.48 and 1.50 or even between 1.52 and 1.54 dollars in three months, all four chosen by 13% of the surveyed. At the same time, the mean forecast for Sep 10 is 1.458.




Dukascopy traders are fully sure about the development of the pair, as the average forecast for June 10 is located slightly below the closing level of last Friday, namely at 1.45. Traders' sentiment, in turn, fully worsened, as now 66.7% of votes is short at the moment.

Retaining a positive outlook towards the Cable this week, nuonrg suggests that "the pair closed below the 1.453 mark, but still on a bullish note." He also mentioned that "we might get a straight push forward. But there are some weakening sings below this level."

Traders are still wary of the ‘Brexit', being that AgentSmith is bearish on the Sterling/Dollar. "The Brexit risk continues to undermine GBP with choppy price action expected to continue until the referendum is held," he commented on his view.

© Dukascopy Bank SA

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