- 59% of all pending orders are to sell the Pound
- 65% of traders are long the Sterlinп
- Immediate resistance is at 1.2245
- The closest at is around 1.2138
- Upcoming events: US Goods Trade Balance, US Markit Services PMI, US New Homes Sales, US Crude Oil Inventories
American consumers were more pessimistic about the path of the economy in October, according to latest survey results published on Tuesday. The Conference Board's Consumer Confidence Index dropped unexpectedly to 98.6 points in October, following the prior month's 104.1, the best level since 2007, while market analysts anticipated a milder decrease to 101.5 during the reported period. The Present Situation Index fell to 120.6 from 127.9 in the tenth month of the year, while the Expectations Index dropped to 83.9 from 87.2 registered last month. Furthermore, the share of respondents expecting more jobs in the upcoming months declined to 13.1% from September's 15.7%, whereas the percentage of those expecting incomes to rise remained unchanged at 17.5% in October. Nevertheless, the share of respondents expecting fewer jobs fell to 17.0% from 18.1% seen in September, as well the percentage of those expecting incomes to drop to 9.8% from the previous month's 10.4%.
After the release, the US Dollar dropped slightly against the Euro, trading at 1.0860, whereas the US Dollar Index, which measures the Greenback against a basket of six major rivals, declined to 98.98.
US Markit Services PMI and New Home Sales
Wednesday is the last day with less impactful data this week. Today one of the most important events is the US Markit Services PMI. It captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in the US. Another event will be the US New Home Sales, which are an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes, so as a result the demand for goods, services and the employees is stimulated. Ahead of tomorrow's Durable and Core Durable Goods Orders, the above-mentioned events are likely to be the only Cable drivers today.
GBP/USD remains on the back foot
Upon reaching the 1.21 level yesterday, the Sterling recovered from most of its intraday losses, resulting in an overall decline of 45-pip. Risks remain skewed to the downside, with the weekly S1 still acting as the main support at 1.2138, but with the 1.21 mark being the absolute bottom floor. Moreover, not event to trigger substantial volatility is present today, thus, the base case scenario is another small decline, sufficient to reach the weekly S1 support. However, we should not rule out the possibility of a the Pound adding a few pips as well, as technical indicators keep giving mixed signals today.
Daily chart
The possible ascending channel pattern ceased to exist before it was even fully realised, amid Tuesday's sharp decline, which caused the lower boundary to be pierced. Even though the Cable attempted to recover afterwards, the bullish trend cannot be ensured now, as there is no solid support present that could prevent the pair from falling under 1.20.
Hourly chart
Traders mostly bullish
Market sentiment improved over the day, as 71% of all open positions are currently long (previously 65%). The majority of all pending orders, on the other hand, are to sell the Sterling, namely 64% of them.
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 67% of traders being long and 33% 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 26 is 1.2491. Furthermore, the 1.18-1.20 interval is now the most popular one, having 13% of the votes each. On the second place in terms of the votes are the 1.20-1.22 (11%) and the 1.28-1.30 (11%) intervals, followed also by the 1.16-18, with 10% of the votes. Moreover, 73% all survey participants believe the Cable is to fall under 1.30.