- The portion of orders to sell the Sterling inched up from 54 to 56%
- 64% of traders are long the British Pound
- Immediate resistance is around 1.2250
- The closest support is at 1.2020
- Upcoming events: Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production, FOMC Member Fischer Speech, MPC Member Broadbent Speech
US retail sales rose more than expected last month, official data revealed on Friday. According to the US Department of Commerce, retail sales grew 0.6% month-over-month in September, in line with analysts; expectations, whereas the preceding month's figure was revised up to -0.2% from the originally reported reading of -0.3%. On an annual basis, retail sales rose 2.7% in the reported month. Excluding automobiles, building materials, food services and gasoline, retail sales advanced 0.5% in September, following August's upwardly revised drop of 0.2% and surpassing the 0.4% rise forecast. The September growth was mainly driven by sales of automobiles, which rose 1.1% in September after falling 0.3% in August.
Other data released by the Department of Labor on the same day showed the Producer Price Index climbed 0.3% in September, compared to last month's 0.0%, while analysts anticipated an increase of 0.2% during the reported period. Year-over-year, the PPI jumped 0.7%, posting the biggest increase since December 2014. Currently, The Atlanta Fed is expecting the US economy to expand at an annualized pace of 2.1% in the Q4 after growing 1.4% in the Q3.
Focus turns to US fundamentals
Today there are events only from the US side that are likely to have an impact on the Cable's performance, such as the US Capacity Utilization Rate, and the Industrial Production. The Capacity Utilization Rate 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. As for Industrial Production, it 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.
GBP/USD anchored around 1.22
The monthly S3 appeared to be too difficult to overcome, causing the Sterling to fall 65 pips at the end of the previous week. The Cable remains stuck in a tight range around the 1.22 major level, with the 1.21 mark acting as the bottom floor and the weekly S3 at 1.2254 as the ceiling, which is now also reinforced by the weekly pivot point. The pair keeps gravitating towards the 1.22 level, thus, a small rally today is the anticipated outcome. However, technical indicators retain mixed signals, therefore, a possibility of an approximately 35-pip decline exists.
Daily chart
The Cable reconfirmed the descending channel's resistance line on Friday, preserving the pattern. The pair once again put the resistance line to the test today, but supply should be sufficient to trigger a sell-off, towards 1.21.
Hourly chart
Traders mostly bullish
Today 64% of traders are long the British Pound, in comparison to 63% on Friday. Meanwhile, the portion of orders to sell the Sterling inched up from 54 to 56%.
A similar situation is observed elsewhere. For example, 61% of positions open at OANDA are currently long. This is more than the share of shorts (39%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 70% of traders being long and 30% 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 higher than the level where it is now. While the current price is around 1.23, the average forecast for January 17 is 1.2782. Furthermore, the 1.28-1.30 interval is now the most popular one, having 14% of the votes. On the second place in terms of the votes is the 1.32-1.34 (12%) interval, followed by the 1.20-1.22, 1.22-1.24 and the 1.30-1.32 price ranges with 9% of the votes each. Moreover, 63% all survey participants believe the Cable is to fall under 1.30.