- The share of buy orders remains unchanged at 57%
- 69% of traders hold long positions
- The nearest resistance is the weekly PP at 1.2975
- Support is around 1.2850
- 51% of traders reckon GBP/USD will be at 1.30 or higher in three months
- Upcoming events: UK CPI, UK PPI Input, UK RPI, US Building Permits, US CPI and Core CPI, US Housing Starts, US Capacity Utilization Rate, US Industrial Production
Sales at US retailers unexpectedly fell in July, official data revealed on Friday. According to the Department of Commerce, retail sales came at a seasonally adjusted 0.0% in the reported month, compared to the previous month's upwardly revised figure of 0.8%, while economic desks pencilled in a deceleration to 0.4%. Furthermore, core retail sales, excluding automobiles, dropped a seasonally adjusted 0.3% in the seventh month of the year, whereas the preceding month's gain was revised up to 0.9% from the originally reported increase of 0.7%, whereas analysts expected a decrease to 0.2%. Separate reported released by the Department of Labor on the same day showed that US producer prices returned to contraction in July after three months of consecutive growth, as the Producer Price Index dropped 0.2% on an annual basis in the reported month, following the 0.3% rise registered in July. Month-over-month, US factory gate inflation declined 0.4% in July, compared to the 0.5% gain seen in the preceding month, while market analysts anticipated a fall to 0.1% in the reported period.
Meanwhile, the University of Michigan Consumer Sentiment survey released on Friday showed that mood among US shoppers improved in August, as it preliminary Consumer Confidence Index rose to 90.4, compared to July's final print of 90.0, while markets predicted the Index to come in at 91.5 in the reported period.
UK and US inflation data to be the main drivers
A number of fundamental data both from the UK and the US are due today. From the UK side attention should be paid to the CPI, which 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. The Core CPI excludes seasonally volatile products such as food and energy in order to capture an accurate calculation. Another important release is the PPI Input, which is a monthly measurement of the rate of inflation, experienced by the UK manufacturers when buying goods and services. It captures changes in the average price of a fixed basket of goods and services purchased by the UK Manufacturers. Furthermore, from the US side the most impact is likely to be also from the CPI data. However, other data could play its part as well, namely the US Building Permits, the Capacity Utilization Rate and the Industrial Production. The Building Permits show the number of permits for new construction projects. It implies the movement of corporate investments (US economic development). It tends to cause some volatility to the USD. The Industrial Production shows the volume of production of US industries such as factories and manufacturing. Up-trend is regarded as inflationary, which may anticipate interest rates to rise. If high Industrial Production growth comes out, this may generate a positive sentiment for the USD. Finally, the Capacity Utilization is the percentage of the US production capacity, which is actually used over the short-time period. It is indicative of overall growth and demand in the US economy. A high capacity utilization stimulates inflationary pressures.
GBP/USD attempts to reclaim 1.29
The Sterling underperformed on Monday, having fallen under the 1.29 mark, but managing to find support at 1.2860. The GBP/USD remains support by the cluster around 1.2850, represented by the Bollinger band, the weekly and the monthly S1s, however, more Pound weakness could cause this area to be pierced. In case of a breach the next target would be the group of supports just under the 1.28 level, with the main one being the down-trend. Even though technical studies are also in favour of the bearish scenario, a possibility of the Cable ending the day in the green zone persists, but with no sufficient impetus for the exchange rate to close above the immediate resistance.
Daily chart
Due to the Cable's mild performance on Monday, it managed to remain within the borders of the descending channel pattern for another day, but unable to retest the lower boundary as was expected. However, with fundamental data driving the pair today, there is a possibility of the exchange rate breaching either trend-line, with risks skewed more to the downside.
Hourly chart
Still no consensus
The number of bulls keeps rising, as 69% of traders hold long positions (previously 67%). The share of buy orders remains unchanged at 57%.
Indecision appears to be widespread, as the same neutral sentiment is observed among the traders of other brokers. At OANDA, 65% of positions are long and 35% are short. The sentiment at Saxo Bank is now somewhat bullish, as the numbers of longs and shorts each take up 61% and 39% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.30 in three months
Slightly more than half of traders (51%) believe the British currency is to cost 1.30 or more dollars after a three-month period. The most popular price interval, however, was selected by 19% of the voters, namely the 1.24-1.26, while the second most popular choices imply that the Sterling is to cost either between 1.28 and 1.30 dollars or between 1.34 and 1.36 dollars in three months, both chosen by 14% of the surveyed. At the same time, the mean forecast for Nov 16 is 1.3131.