- The share of buy orders increased from 49 to 57%
- But market sentiment remains bullish at 62%
- The nearest resistance is located at 1.4288
- The Bollinger band, the monthly S2 and the weekly S1 form support circa 1.4090
- 55% of traders reckon GBP/USD will be at 1.46 or higher in three months
- Upcoming events: US Building Permits, US Housing Starts, UK Public Sector Net Borrowing, Fed Chair Yellen Testimony
The British Pound managed to post gains against most major peers, with exception against the Yen. Rather mild losses were registered against the Aussie, the Loonie, the Swissie and the Euro, as the Sterling added 0.61%, 0.43%, 0.37% and 0.29% against them, respectively. At the same time, the GBP/JPY edged 1.66% lower, amid the BoJ's decision to leave its monetary policy unchanged. The British currency also sustained a 0.16% loss against the New Zealand Dollar, while remaining almost completely unchanged against the US Dollar (down 0.01%).
The Bank of England issued a fresh warning that uncertainty about the EU referendum next week threats knocking Britain's economic growth, pushing the Pound dramatically lower, as well as presents the "largest immediate risk" for global financial markets. If Britons were to opt for exiting the world's largest trading bloc, the adverse effect could severely hamper the global economy, the BoE rate setters said. The officials again reiterated that Brexit could lead to inflation, which would increase largely on the back of a dramatic deprecation of the British currency, while the economic growth and labour market would suffer a blow from falling investments. The Pound has already dropped in the run-up to the vote as opinion polls have shown a lead for the leave vote. However, the central bank said it had contingency measures in place to deal with any fall-out from the referendum result, including the offer of more support to banks and partnerships with other central banks to keep financial stability.
BoE officials remained unanimous on the policy stance as an elevated level of volatility continues to undermine the recent macro data. Policy makers kept the benchmark interest rate at its record low of 0.5%.
US Building Permits is the only relevant event today
Friday is rather poor in terms of fundamental events that can influence the Cable today. The US Buildings Permits is one of the events that could have an impact. They show the number of permits for new construction projects. They also imply the movement of corporate investments (US economic development). The Building Permits tend to cause some volatility to the USD, normally, the more growing number of permits, the more positive it is for the US Dollar. Another event is the US Housing Starts, which is released by the US census Bureau. This data is released monthly, but is reported in an annualised format. The Building Permits slightly overshadow the Housing Starts, as they are tightly correlated.
GBP/USD attempts to negate weekly losses
The Cable managed to erase intraday losses and trade flat on Thursday, amid two main opposing referendum groups suspending their campaigns. The main support area, represented by the Bollinger band, the monthly S2 and the weekly S1 was confirmed once more, suggesting that a drop below the 1.41 level is doubtful, at least for now. However, technical indicators insist the GBP/USD pair is to continue weakening today. With no solid fundamental impetus present, the Sterling has the potential to erase this week's losses completely, but only if the immediate resistance in face of the monthly S1 at 1.4288 gives in.
Daily chart
Upon nearly reaching the April low, the GBP/USD currency pair managed to rebound, also preserving the support trend-line. Now the 200-hour SMA is the main resistance, preventing the pair from climbing higher, namely towards the down-trend around 1.4750.
Hourly chart
Bulls and bears remain in balance
Although not as strong as yesterday, but market sentiment remains bullish at 62%. The share of buy orders increased from 49 to 57% today.
Compared to Tuesday, there are also slightly more bulls at OANDA - they take up 57% 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 ten percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
The majority of traders (55%) 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 (16%) of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Sterling is to cost between 1.52 and 1.54 in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for Sep 17 is 1.4606.
The consensus forecast for Friday stands at 1.434, almost in line with the last week's average price of 1.44. The number of those who expect the pair to appreciate or move to the south, is almost equal to each other.
Nuonrg believes that the British Pound is to edge higher against the by week's end. "The Pound has come down into the neckline from the daily head and shoulders pattern. Although the Cable is weak on Brexit danger," he said, backing up his outlook.
Meanwhile, rokasltu thinks that the Sterling is to weaken against the US Dollar by Friday. Rokasltu said the following: "As Brexit chances seems to be increasing I think GBP will be under pressure during next week. In my opinion GBP/USD might decrease by few hundred pips during this week."