- 56% are buy and 44% are sell orders
- Bears have the 14 pp lead
- August high is at 1.3370
- 200-hour SMA and 23.6% Fibo create support at 1.3320/10
- Traders' forecasts remain stable
- Upcoming events: UK CPI, PPI, RPI
Britain's trade deficit narrowed slightly less than expected in July, official figures revealed on Friday. According to the UK Office for National Statistics, the country's total trade gap shrank to 4.5 billion pounds in July, compared to the preceding month's upwardly revised gap of 5.6 billion pounds, whereas market analysts expected Britain's trade deficit to narrow to 4.1 billion pounds in the reported month. Exports of goods and services increased 2% to 43.8 billion pounds, while imports dropped 0.5% to 48.3 billion pounds in July. In the meantime, the UK's visible trade deficit shrank to 11.8 billion pounds in the seventh month of the year, following June's upwardly revised gap of 12.9 billion pounds, while economic desks penciled in a fall to 11.7 billion pounds. Although the British Pound dropped markedly following the country's decision to leave the European Union, the ONS stated in its report that it was far too early to assess the Brexit impact on exports that were projected to grow sharply amid the weaker Sterling.
Back in July, the British Pound was 15% lower against other major currencies, compared with the same period last year. The narrowing of Britain's trade deficit offered some hope that the economy will continue to expand in the Q3 of 2016, despite earlier recession fears.
Inflation to keep gaining momentum
Albeit only fractionally, but inflation in the United Kingdom is expected to accelerate from 0.6 to 0.7%. Along with the CPI data at 08:30 GMT, we will also see Producer Price Index and Retail Price Index, which will give an even more colourful picture of the state of affairs with prices. However, both readings are likely to come in lower than their previous levels, with PPI average forecast standing at 0.6% against 3.3% seen just a month ago.
GBP/USD bounced off of 1.3230
As expected, the currency pair rebounded after approaching the lower bound of the five-week channel. The rally from 1.3230 is also supported by the near-term technicals. The first target is a weekly and monthly R1 cluster, and we expect the price to go all the way to 1.3550 before there is a notable sell-off. Additional resistance is at 1.3650 (monthly R2 and 38.2% Fibo), followed by the 100-day SMA at 1.3740. However, in case of a close beneath 1.3250 the focus will immediately shift to 1.3130, namely the monthly pivot point.
Daily chart
In the hourly chart GBP/USD has broken through the upper bound of the near-term descending channel and through the 200-hour SMA, adding to the upside risks. While the immediate support is at 1.3320/10, the nearest target is the August high at 1.3370.
Hourly chart
SWFX traders are again bearish
Sentiment returned to the levels seen five days ago, when the bears had the advantage with the 14 percentage point lead. As for the pending orders, 56% are placed to sell and 44% are placed to buy the Sterling against the Dollar.
Similarly, sentiment among Saxo Bank traders is somewhat bearish as well: 44% of open positions are long and 56% are short. Nevertheless, OANDA clients seem to have a different opinion on the Cable, being that according to their data the number of bulls exceeds the number of bears by 10 percentage points, suggesting the sentiment is bullish instead.
Spreads (avg, pip) / Trading volume / Volatility
Traders' forecasts remain stable
Traders have not materially changed their view on GBP/USD since the beginning of July, with the average forecast fluctuating slightly in the range between 1.32 and 1.30 dollars. However, the actual percentage of people who voted for this interval is only 5%, and merely 11% of traders voted for the 1.30-1.34 interval, where the currency pair has been trading since the beginning of July. The most popular answer choice was the 1.36-1.38 interval, which was chosen in 15% of cases. At the same time, 43% of traders expect the Cable to be above 1.34 and 47% of traders expect the rate to be below 1.30 in three months.