- The portion of sell fell from 62 to 61%
- 56% of traders are long the Pound
- The nearest resistance is located around 1.3225
- Support is at 1.2700
- 57% of traders reckon GBP/USD will be at 1.36 or lower in three months
- Upcoming events: UK Claimant Count Change, UK Unemployment Rate, UK Average Earnings Index, US Crude Oil Inventories
Inflation in the UK rose during the 'Brexit month' year-on-year, while the core CPI reading showed a fresh climb. The cost of living in the UK rose 0.2% over the month in June while rising 0.5% in the final month of Q2, the report from ONS showed, while markets had pencilled in a 0.3% rise of the indicator in the reported month. Meanwhile, excluding volatile food and energy prices, the so-called core inflation reading revealed an improved reading, rising 1.4% in June. The main drivers of the monthly move were transport and recreation, which both contributed 0.1 percentage points to the 0.15% overall change. Air fares were up 10.3% between May and June 2016, compared to 0.3% last June. The core CPI has been hovering around this level since the beginning of the year, highlighting that the country's inflation probably needs additional stimulus in order to reach the BoE's target level of 2%, especially after the post-Brexit shock on financial markets.
In the meantime, a separate report showed that UK input producer prices increased 1.8% for June after a 2.6% gain previously and well above the consensus expectations of 1.0% increase. The annual decline slowed sharply to 0.5% from 4.4% previously and should turn positive next month. The scope for a loose monetary policy will be significantly reduced if output prices accelerate over the next few months.
UK Labour figures to steer the Cable today
Among important fundamental events today attention should be paid to the UK employment figures, such as the Claimant Count Change. It shows the number of people claiming unemployment-related benefits during the preceding month. Employment figures are an important indicator of the overall economic health in the UK, as it is highly correlated with the labour-market conditions. Another important indication is the Unemployment Rate, which is the percentage of people that are unemployed and have been searching for jobs for the past quarter. Unemployment is also an important sign when it comes to monetary policy in the UK. From the US side there are no significant events to influence the GBP/USD today.
GBP/USD: risks skewed to the downside
Despite strong UK inflation figures, the Sterling was unable to outperform the US Dollar, having returned to the 1.31 psychological level yesterday. Today's fundamentals are expected to have a higher impact on the British Pound, but the Cable is now located under a relatively strong resistance area, represented by the weekly PP and the 20-day SMA; therefore, it is uncertain whether positive figures will be sufficient to erase yesterday's losses completely. Moreover, technical indicators suggest the pair is to weaken further, with the nearest support being the weekly S1 at 1.2868, also reinforced by the one-year trend-line.
Daily chart
As was anticipated, the 200-hour SMA was unable to prevent the GBP/USD currency pair from falling deeper down yesterday. The pair is also expected to struggle to post gains beyond the 1.3140 mark, as for three days straight a clear down-trend emerged.
Hourly chart
Bulls remain in control
Today 56% of traders are long the Pound (previously 57%), whereas the portion of sell orders barely changed, having fallen from 62 to 61%.
Compared to Friday, there are slightly less bulls at OANDA - they take up 53% 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 4 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.40 in three months
More than half of traders (57%) believe the British currency is to cost 1.36 or less dollars after a three-month period. The most popular price intervals was selected by only 18% 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 15% of the surveyed. At the same time, the mean forecast for Oct 20 is 1.3394.