- 56% of traders have a positive outlook towards the British currency
- The number of purchase orders edged up from 41 to 48%
- Notable demand area at 1.2888/1.2880
- A strong resistance cluster is around 1.3140
- Upcoming events: US Building Permits, US Housing Starts
Consumer prices in the United States rose more than expected last month, official data revealed on Friday. According to the US Bureau of Labor Statistics, the overall Consumer Price Index (CPI) jumped 0.2% month-over-month in August, compared to the preceding month's reading of 0.0%, while market analysts anticipated a slighter acceleration to 0.1% during the reported month. On an annual basis, the CPI increased 1.1%, up from July's 0.8%. The so-called core CPI that excludes goods with high price volatility, such as food and energy, advanced 0.3% on a monthly basis in August after rising 0.1% in July, whereas economic desks expected the core inflation to grow 0.2% last month. On a yearly basis, the indicator climbed 2.3% during the reported period, slightly up from July's 2.2% reading. The modest rise in inflation last month is likely to be welcomed by the Federal Reserve at its meeting next Tuesday and Wednesday.
However, it is widely expected to leave interest rates on hold amid weak retail sales, industrial production and job growth. Within the headline CPI basket, the price of gasoline dropped 0.9% last month, compared to July's 4.7% fall. Food prices were unchanged, whereas the cost of food consumed at home decreased for the 4th consecutive month.
Another uneventful Monday
Monday is going to be quiet in terms of fundamental data. However, on Tuesday attention should be paid to the US Building Permits and Housing Starts, due at 12:30 pm GMT. The Building Permits are released by the US Census Bureau and 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. Normally, the more growing number of permits, the more positive (or bullish) for the USD. The Housing Starts, on the other hand, is an annualised number of new residential buildings that have already begun construction during the preceding month.
GBP/USD hovers above 1.30
The British Pound plunged against the US Dollar on Friday, amid a strong reading of the US CPI. As a result, the main support area around 1.3140 failed to limit the losses, causing the Cable to drop as low as the 1.30 psychological level. Demand, represented by the 1.30 mark, could cause the pair to rebound, while lack of potential market movers today supports this outlook. Technical studies, however, are giving mixed signals today, unable to confirm the scenario. Consequently, we should not rule out the possibility of the Cable falling deeper down under 1.30, even though it seems unlikely today.
Daily chart
Friday's drop was sufficient to cause a breach of the august low of 1.3060, but with the 1.30 major level succeeding in limiting the losses. Technically, the Cable should now continue undergoing a bullish correction, with the nearest resistance being the 1.32 mark. However, the road to 1.28, namely the July low, is also open.
Hourly chart
Traders remain undecided
There are 56% of traders with a positive outlook towards the British currency today, compared to 51% on Friday. At the same time, the number of purchase orders edged up from 41 to 48%.
A different situation is observed elsewhere. For example, 65% of positions open at OANDA are currently long. This is more than the share of shorts (35%), sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 65% of traders being long and 35% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be more or less at the same level where it is now. While the current price is 1.3230, the average forecast for December 19 is 1.3197. Interestingly enough, however, the 1.32-1.34 interval is one of the least popular along with 1.38-1.40, having only 5% of the votes each. Most of the votes are concentrated in 1.28-1.30 (15%) and 1.36-1.38 (15%) intervals.