- The number of orders to sell the Sterling declined from 64 to 58%
- 68% of all open positions are long
- Immediate resistance is at 1.2254
- The closest support is at 1.2234
- Upcoming events: UK Preliminary GDP, US Durable and Core Durable Goods Orders, US Initial Jobless Claims, US Pending Home Sales
Oil prices jumped above the $50 level on Wednesday as US crude oil inventories dropped unexpectedly last week. According to the Energy Information Administration's report, domestic crude stockpiles fell 0.6 million barrels in the week ended October 21, following the preceding week's 5.2 million barrel decline, while market analysts anticipated a slight increase of 0.7 million barrels during the reported period. Meanwhile, the American Petroleum Institute's preliminary report released on Tuesday suggested a 4.8 million barrel rise for the same week. Crude oil stocks usually rise at this time of year as the summer driving season ends and refineries enter the autumn turnaround season. The EIA also said that gasoline stocks dropped 2 million barrels, whereas analysts had expectations for a 1 million barrel decline. Moreover, distillate stockpiles were down 3.4 million barrels, surpassing the 1.4 million barrel drop forecast.
After the release, Brent futures were seen trading $0.33 lower at $50.46 per barrel by 14:35 GMT on the New York Stock Exchange, whereas West Texas Intermediate futures were seen trading $0.06 higher at $50.02 by the same time.
UK GDP, US Durable Goods Orders and Pending Home Sales
Thursday is here and some significant data are due today. First of all, the UK GDP. It shows the monetary value of all the goods, services and structures produced within a country in a given period of time. The GDP is a gross measure of market activity, because it indicate the pace at which a country's economy is growing or decreasing. Moreover, this preliminary reading tends to have the most impact, as it is the earlier reading, providing the earliest insight on the economic situation in the UK. Another important event will be the US Durable Goods Orders, which measure the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments, they are sensitive to the US economic situation. The final figure shows the state of US production activity. The Core reading, however, excludes the transport sector, providing a clearer reading. Finally, the US Pending Home Sales, which are a leading indicator of trends of the housing market in the US. It captures residential housing contract activity of existing single-family homes. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD.
GBP/USD struggles to climb higher
Still being backed by BoE Carney's comments, the British currency successfully outperformed the US Dollar on Wednesday. However, the monthly S3 once again prevented the Cable from rising further up, so unless today's fundamentals are in the Pound's favour, the pair is likely to bounce back down. Technical indicators are unable to confirm any scenario today, thus, a decline towards the weekly S1 at 1.2138 is possible. On the other hand, if the monthly S3 gives in, the upside limit is seen around 1.2350, namely between the weekly R1 and the 20-day SMA resistance area.
Daily chart
The British currency managed to recover to its previous trading area, after having experienced a relatively sharp decline of more than 100 pips. The GBP/USD pair has been struggling to stabilise above the 200-hour SMA since previous Tuesday, thus, the pressure remains, as well as downside risks.
Hourly chart
Traders mostly bullish
Market sentiment remains strongly bullish, with 68% of all open positions being long today (previously 71%). At the same time, the number of orders to sell the Sterling declined from 64 to 58%.
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 64% of traders being long and 36% 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 27 is 1.2489. Furthermore, the 1.18-1.20 interval is now the most popular one, having 14% of the votes. On the second place in terms of the votes is the 1.20-1.22 (11%) interval, followed also by the 1.16-18, the 1.28-1.30 and the 1.32-34 with 10% of the votes each. Moreover, 72% all survey participants believe the Cable is to fall under 1.30.