- The number of sell orders returned to its Monday's level of 60%
- 65% of traders are long the Pound
- Immediate resistance is around 1.2497
- The closest support is at 1.24
- Upcoming events: US Jobless Claims, FOMC Member Bullard Speech, US Federal Budget Balance
The United Kingdom's trade deficit narrowed in the Q3 despite the post-Brexit uncertainty, official data revealed on Wednesday. According to the Office for National Statistics, the total British trade deficit dropped to 11.0 billion pounds in the Q3, following the preceding quarter's gap of 12.7 billion pounds ($15.8 billion), the highest level since 2013. Furthermore, even though the deficit on trade in goods jumped to 12.7 billion pounds in September, as the deficit with the EU increased to 8.7 billion pounds from 7.9 billion pounds, it narrowed to 33.2 billion pounds for the whole Q3. In the meantime, the trade in goods and services deficit climbed to 5.2 billion pounds in September, compared to the previous month's 3.8 billion-pound gap. The growth of exports was mainly driven by the weak British Pound, which dropped around 18% against the US Dollar and fell markedly against other major currencies following the country's decision to leave the European Union.
Nevertheless, the fall in the value of the Sterling is likely to widen the trade gap as the cost of imports rise. Moreover, Donald's Trump win in the US presidential election is expected to increase the already exciting uncertainty that will markedly impact the GBP/USD pair and British exports.
No significant events due on Thursday
Today on Thursday there is are no significant events to influence the GBP/USD pair's performance, but attention could still be paid to the US Initial Jobless Claims and the US Monthly Budget Statement. The Jobless Claims are a measure of the number of people filing first-time claims for state unemployment insurance. It provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy. Generally speaking, a decreasing number should be taken as positive or bullish for the USD. As for the Monthly Budget Statement, it summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve Banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD. On the other hands, a negative figure that indicates government debt is seen as bearish.
GBP/USD to keep edging higher
The British currency was unable to sustain solid growth, as it erased most of its intraday gains against the American Dollar on Wednesday. However, a bearish development now is unlikely, as the Cable is supported by the weekly and the monthly PPs just below today's opening price. Furthermore, technical indicators retain bullish signals, bolstering the possibility of the positive outcome. A rally beyond the 1.25 major level is doubtful, as the psychological major level is also reinforced by the Bollinger band. Overall, due to the breach of the post-Brexit down-trend last week, the Sterling is likely to keep outperforming the Greenback in the short-term.
Daily chart
On the hourly chart the Cable is seen edging higher, while being supported by a nearly two-week trend-line. Moreover, this up-trend is reinforced by the 200-hour SMA, suggesting that a breach and trend-line is unlikely, thus, the pair is expected to continue edging higher.
Hourly chart
Traders mostly bullish
Today 65% of traders are long the Pound (previously 63%), whereas the number of sell orders returned to its Monday's level of 60%.
A similar situation is observed elsewhere. For example, 63% of positions open at OANDA are currently long. This is more than the share of shorts (37%), more than 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 higher than the level where it is now. While the current price is around 1.24, the average forecast for November 10 is 1.2181. Furthermore, the 1.18-1.20 interval is now the most popular one, having 19% of the votes. On the second place in terms of the votes is the 1.16-1.18 (14%) interval, followed also by the 1.20-1.22 with only 12% of the votes. Moreover, 72% all survey participants believe the Cable is to fall under 1.26.