- The number of sell orders increased from 52 to 64%
- 54% of are being long the Pound
- The nearest resistance is located at 1.3261
- Support is at 1.3155
- 59% of traders reckon GBP/USD will be at 1.32 or lower in three months
- Upcoming events: UK Gfk Consumer Confidence, US Jobless Claims, US Natural Gas Storage, UK Net Lending to Individuals, US Advance GDP
UK GDP advanced 0.6% on a seasonally adjusted basis in the second quarter of 2016, as reported by the Office for National Statistics on Wednesday, surpassing the 0.5% market forecast and the 0.4% rise seen in the first quarter. Economic output expanded in 2 out of 4 main industrial sectors: services added 0.5%, whereas production gained 2.1%. However, construction and agricultural sectors showed a pronounced downward trend sliding 0.4% and 1% respectively. Year-over-year, British GDP increased by 2.2%, above the expected 2% and compared to the 2% reading in the previous quarter. The Pound weakened upon the news release and traded at just $1.311, while the FTSE 100 Index reached its highest level since July 2015 and traded at 6,770 in the second half of the London session on Wednesday.
Despite the positive economic outlook provided by the quarterly GDP data, supported by the BoE and the Treasury promises to take all the needed actions to accommodate the economic growth, experts noted that the published results included only one week after the Brexit vote and were largely driven by booming industrial activity in May/June. The overall market forecast for the third quarter was revised down to 0.4%, reflecting the expectations of weakening economy captured by plummeting retail sales and lackluster PMI figures.
UK Gfk Consumer Confidence and US Initial Jobless Claims
Thursday is rather dull in terms of economic data releases, as there are only two events that could influence the GBP/USD performance today. First, the UK Gfk Consumer Confidence, which is a leading index that measures the level of consumer confidence in economic activity. A high level of consumer confidence stimulates economic expansion, while a low level drives to economic downturn. The second event is the US Initial Jobless Claims. It is a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market.
GBP/USD to return under 1.32
A rather dovish FOMC stance and poor US fundamentals on Wednesday caused the Greenback to weaken against the British Pound, resulting in the Cable's 90-pip rally. Nevertheless, the GBP/USD currency pair still remains within its recent trading range, namely between the 1.31 and the 1.3250 levels. The upper border is also bolstered by the weekly R1, thus, we should see the Sterling edge lower again today. Technical indicators are also in favour of the bearish scenario, in which case the weekly PP and the 20-day SMA are to act as the nearest support around 1.3155.
Daily chart
The GBP/USD currency pair finally broke out of consolidation, having put the descending channel's resistance line to the test yesterday, therefore, confirming it. Consequently, the exchange rate is now expected to move lower, although some obstacles might be encountered around 1.3170 – where the 200-hour SMA is located.
Hourly chart
Bulls remain in control
Traders' Sentiment For two straight weeks now market sentiment barely changes. There are currently 54% of traders being long the Pound (previously 55%), while the number of sell orders increased from 52 to 64%.
Compared to Monday, there are slightly more bulls at OANDA - they take up 57% of the positions open with the Canada-based broker (compared to 55% on Wednesday). Sentiment at Saxo Bank remains somewhat neutral, as here the number of bulls exceeds the number of bears by only 6 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.32 in three months
More than half of traders (59%) believe the British currency is to cost 1.32 or less dollars after a three-month period. The most popular price intervals was selected by only 21% 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 19% of the surveyed. At the same time, the mean forecast for Oct 28 is 1.3197.