- 58% of all pending orders are to sell the Sterling
- 67% of traders have a positive outlook towards the Pound
- Immediate resistance is at 1.2393
- The closest support is around 1.2250
- Upcoming events: UK Public Sector Net Borrowing, US Markit Manufacturing PMI
Britain's retail sector proved to be slightly worse than expected, as the amount of items bought missed expectations. According to the Office for National Statistics, retail sales increased 4.1% on an annual pace in September, compared to a 6.6% advance in August and analysts' expectations for a 4.9% gain. Meanwhile, clothing and footwear sales lost 2.8% after prices skyrocketed 5.2%, showing the biggest jump in six years. Moreover, Britain also enjoyed one of the warmest Septembers on record, thus people was not obliged to buy autumn clothes.
Core retail sales, in turn, which exclude automobile sales and fuel, did not show any changes last month, compared to the previous 0.1% decrease in August which was revised up from an initial reading of a 0.3% decline. Analysts had expected core retail sales to add 0.4% last month. The following figures suggest the economy is continuing to be influenced by consumer spending, with retail sales contributing 0.1% to gross domestic product in the third quarter. Annual sales growth in the third quarter held at 5.4%, the strongest since the start of last year.
Relatively quiet end of the week
Friday is really poor in terms of fundamental data, with only one event likely to have some impact on the Cable's performance, namely the UK Public Sector Net Borrowing. It is the difference between spending and income for central and local governments, as well as public corporations. Released by the Office for National Statistics, a positive result indicates a budget deficit, which is considered to be bearish for the GBP, while a negative number indicates a surplus, thus, considered as positive. On Monday traders can focus on the Markit Manufacturing PMI, which captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in the United States. Readings above 50 imply the economy is expanding, making investors understood it as bullish for the USD, whereas a result below 50 points for an economic contraction, and weighs negatively on the currency.
GBP/USD in tight range between 1.22 and 1.23
The British currency ended trade on Thursday with a 33-pip loss against the US Dollar, managing to retain its position above the monthly S3. With technical indicators remaining mixed, the GBP/USD currency pair risks edging lower. The weekly PP and the monthly S3, however, keep providing immediate support, which could still trigger a recovery towards the 1.23 mark. On the other hand, after Tuesday's relatively strong rally the Sterling has been sliding down; moreover no potential game changer is present today, thus, the base case scenario is a bearish development. Losses are unlikely to exceed the 1.22 major level.
Daily chart
The Cable remained within the borders of a possible new channel pattern, following along the path of the 200-hour SMA. Ultimately, we could see the 1.22 level put to the test, where a rebound is expected. In this case the up-trend will be confirmed and the pair would be then likely to make its way towards 1.24 – where the upper border of the channel rests.
Hourly chart
Traders mostly bullish
There are 67% of traders with a positive outlook towards the Pound today (previously 64%). Meanwhile, the majority of all pending orders are to sell the Sterling, namely 58% of them.
A similar situation is observed elsewhere. For example, 59% of positions open at OANDA are currently long. This is more than the share of shorts (41%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 68% of traders being long and 32% 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 21 is 1.2622. Furthermore, the 1.28-1.30 interval is now the most popular one, having 12% of the votes. On the second place in terms of the votes is the 1.32-1.34 (11%) interval, followed by the 1.16-1.18 price range with 10% of the votes. Moreover, 68% all survey participants believe the Cable is to fall under 1.30.