- The number of sell orders increased from 61 to 69%
- 57% of traders have a positive outlook towards the Sterling
- The nearest resistance is located around 1.3525
- Support is at 1.3190
- 59% of traders reckon GBP/USD will be at 1.36 or lower in three months
- Upcoming events: UK Retail Sales, UK Public Sector Net Borrowing, US Philadelphia Fed Manufacturing Index, US Jobless Claims, US Existing Home Sales, US HPI
The unemployment rate in the UK fell to its lowest level in more than a decade in May, a sign the labor market continued to strengthen in the run-up to Britain's referendum on membership of the European Union, while average weekly earnings edged up in the same month. The unemployment rate in the UK came in at 4.9% in the fifth month of the year, unaffected by the Brexit fears before the referendum. The unemployment rate in the UK measured on a three months moving average basis, therefore, fell below the level of the natural, or non-inflationary, unemployment level of 5.0% estimated by the Bank of England. Meanwhile, the number of people in work rose to another record high, reaching 31.7 million. Initial jobless claims showed slightly worsening labor market conditions in the UK during the Brexit month, as the index revealed 400 new people claimed unemployment benefits in June. In the meantime, a separate report showed that the claimant count ticked up by 400 between May and June, but more strikingly, the April-May rise was revised up to 12,200 from an originally reported fall of 400.
The Office for National Statistics also reported that average weekly earnings registered a rise of 2.2% excluding bonuses in May, while the indicator advanced 2.3% including bonuses in the same month.
UK Retail Sales to be the main Cable driver today
Thursday brings the UK Retail Sales figures, which should have the most impact on the Cable today. The Retail Sales are released by the Office for National Statistics, which measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. At the same time, the Core Retail Sales exclude fuel. Another event from the UK is the Public Sector Net Borrowing, which shows the difference in value between spending and income for public corporations, as well as central and local governments. A positive reading indicates a budget deficit, while a negative one – budget surplus. It tends to have some impact on the Sterling pairs. From the US side the Philly Fed Manufacturing Index is due today. It is a spread index of manufacturing conditions within the Federal Reserve of Philadelphia. It serves as an indicator of manufacturing sector trends and is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of the ISM Index. Finally, the US Housing Price Index, which provides an estimated value of housing market conditions. It is an important indicator, as the housing market is considered as a sensitive factor to the US economy.
GBP/USD anchored around 1.32
Strong UK employment figures caused the Sterling to outperform the US Dollar on Wednesday, but with the pair still failing to fully negate Tuesday's losses. Today the Cable opened on top of a relatively strong support cluster, represented by the 20-day SMA and the weekly PP, which should prevent the Pound from falling down again. However, technical indicators retain bearish signals, suggesting that another decline towards the 1.31 mark is possible. On the other hand, in case bulls take over the market, gains are unlikely to exceed the 1.3350 level, despite the nearest resistance located only around 1.3540.
Daily chart
The Cable was able to pierce the down-trend yesterday, also breaching through the 200-hour SMA and retaking the 1.32 major level. With the down-trend broken, the GBP/USD currency pair has the potential to rise even further, with the main target being the 1.3315 level, namely this week's current high.
Hourly chart
Bulls remain in control
Once again 57% of traders have a positive outlook towards the Sterling (previously 56%), while the number of sell orders increased further, having risen from 61 to 69% over the day.
Compared to Friday, there are slightly less bulls at OANDA - they take up 54% 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 1.36 in three months
More than half of traders (59%) 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 21 is 1.3369.