- The portion of orders to purchase the Sterling takes up 57% of the market
- Market sentiment is bearish at 58%
- The nearest resistance is located around 1.4750
- The 200-day SMA and the weekly R2 form support at 1.4650
- 51% of traders reckon GBP/USD will be at 1.46 or higher in three months
- Upcoming events: EU Membership Vote, US Jobless Claims, US New Home Sales, US Manufacturing PMI
As reported by the US Census Bureau, there were 1.164 million constructions of residential buildings The UK Public Sector Net Borrowing figure improved with the latest release, which showed that the borrowing was at £9.7 billion in May, beating the £9.35bn forecast. Moreover, the April's data was also revised up to £8.2 billion from the initial £6.58 billion, meaning that it was significantly worse than first thought. An increase in the deficit has been detected mostly due to higher government spending, which rose to £56 billion, while central government investment rose up to 2.8%, followed by an increase in debt interest to 16.7%. There was also a downward revision to net borrowing in the preceding year, namely down to £74.9 billion, down £16.7 billion in comparison to the year before that, as reported by the Office for National Statistics.
Nevertheless, according to the Office for Budget Responsibility's March budget review, this figure is still above their target of £72.2 billion. The OBR also kept revising its medium-term forecasts, amid the government receipts failing to meet expectations, with them anticipating the government to miss its surplus target only starting from 2019. Overall, debt keeps rising, excluding taxpayer-backed banks, which was equal to 83.7% of GDP at the end of May, or £1.6 trillion.
EU referendum is the main driver
Although there is a small number of fundamental data due today, it all concerns the US, while the main event to influence the GBP/USD currency pair is the EU referendum today. The UK is to vote on a referendum, deciding whether it will continue to be a part of the European Union. High volatility is expected.
GBP/USD on the edge of breaking 23-month down-trend
Ahead of the EU referendum the Pound managed to appreciate against the US Dollar for another day yesterday, but still unable to pierce the 23-month down-trend. Everything now depends on the ‘Brexit' poll results, but from the technical point of view, a ‘Brexit' is more probable, as the Cable would then reconfirm the down-trend. Consequently, a drop beyond the 1.45 mark could take place, unless demand around that area, represented by the weekly R1, the monthly PP, the 20 and the 55-day SMAs, is strong enough to limit the losses. On the other hand, ‘Bremain' outcome might lead to a strong rally, with the exchange rate even climbing over the 1.50 major level today.
Daily chart
As was expected, the GBP/USD pair remained in consolidation, but breached the down-trend by day's end. Such slight breaches usually mean that more drastic bearish developments are likely to follow, thus, a drop at least towards 1.44 is possible to occur.
Hourly chart
Bears are now outnumbering the bulls
Market sentiment is bearish at 58%, whereas the portion of orders to purchase the Sterling takes up 57% of the market.
Compared to Monday, there are also slightly more bears at OANDA - they take up 53% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is still bearish, as here the number of bears exceeds the number of bulls by 18 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
Exactly half of traders (51%) 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 1.50 and 1.52 dollars in three months, chosen by 11% of the surveyed. At the same time, the mean forecast for Sep 23 is 1.4527.
All in all, Community members, that took part in the survey last week, expect the pair to end this week at 1.46, with number of bears (25%) versus bulls (75%).
This week megajorko is bullish on the Cable. He said that "everyone is expecting the Brexit referendum this week so anything can happen to the cable including decline to 1.35 and total rocket jump to 1.60."
At the same time, some traders expect the UK to vote to leave the EU, therefore, for the Sterling to weaken by week's end. "The Brexit referendum is approaching, thus everything will become clear on Thursday", he commented.