- 65% of all pending orders are to sell Pound
- 59% of traders are long the Sterling
- The nearest resistance is located around 1.3475
- Support is at 1.3175
- 67% of traders reckon GBP/USD will be at 1.40 or lower in three months
- Upcoming events: NAHB Housing Market Index, UK CPI, UK PPI, UK RPI, US Building Permits, US Housing Starts, MPC Member Broadbent Speech
On Thursday, the Bank of England surprised markets by holding interest rates, despite hints from Governor Mark Carney that policy easing could be possible made earlier. Economists had expected a rate cut of 25 points to 0.25%, which would have been the first rate change in seven years. Following assumptions appeared after the Brexit referendum on 23 June, when Britons widely vote to leave the European Union. According to the minutes of the meeting, the Bank's Monetary Policy Committee voted by 8-1 to hold rates, as well as hinting that they "expect monetary policy to be loosened in August". Moreover, the BoE announced in its policy statement that they would give another month to evaluate the Brexit's impact on the economy and probably would raise stimulus measures in August. Currently, the bank's benchmark rate equals 0.5%. Following decision is widely appreciated by economists, since many experts are saying the Bank made the right decision by leaving interest rates unchanged.
In the meantime, the Pound advanced while shares, in turn, dropped after the Bank of England unexpected decision. The Cable added around 1.4%, or two cents, versus the dollar reaching $1.3326.
Uneventful Monday
Monday is really quiet in terms of economic data releases, with the only relevant event being the US NAHB Housing Market Index. It presents homes sales and expected home buildings in the future, indicating housing market trend in the US. The growth rate of the housing market affects the USD volatility. On Tuesday, however, attention should be paid to the UK inflation data, such as the CPI. It is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Core CPI excludes the food and energy sectors, providing a much clearer reading.
GBP/USD in limbo around 1.32
As was anticipated, the British currency weakened against the US Dollar on Friday, but failed to find support at the 1.32 mark, with the exchange rate slightly crossing that level. The Pound could attempt to regain some value and close above that major level again today, as the weekly PP is providing immediate support just below the opening price. In this case gains are unlikely to exceed the 1.3350 level, due to lack of impetus today. On the other hand, technical indicators are now giving bearish signals, suggesting the Cable might fall down towards the 1.31 area.
Daily chart
On the hourly chart the Cable was seen breaking through the lower border of the rising wedge pattern on Friday, fully confirming it. Technically, more bearish momentum should now follow, but the 200-hour SMA is unlikely to let the exchange rate fall below the 1.31 mark, with no substantial catalyst present.
Hourly chart
Bulls remain in control
Today 59% of traders retain a positive outlook towards the GBP/USD pair, compared to 57% on Friday. However, a large number of all pending orders are to sell the Sterling, namely 65% of them.
Compared to Friday, there are slightly more bulls at OANDA - they take up 55% of the positions open with the Canada-based broker. Sentiment at Saxo Bank weakened further, as here the number of bears exceeds the number of bulls by 2 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.40 in three months
More than half of traders (67%) believe the British currency is to cost 1.40 or less dollars after a three-month period. The most popular price intervals was selected by only 15% of the voters, namely the 1.28-1.30 one, while the second most popular choice implies that the Sterling is to cost between 1.24 and 1.26 dollars in three months, chosen by 11% of the surveyed. At the same time, the mean forecast for Oct 18 is 1.3598.