- 65% of pending orders to sell the Sterling
- 67% of traders are now long the Pound
- Immediate resistance is at 1.2544
- The closest support is around 1.2390
- Upcoming events: MPC Members Broadbent's Speech, FOMC Member Bullard's, Maechler's, Dudley's and George's Speeches, US CB Leading Index, UK Public Sector net Borrowing, US Existing Home Sales
British retail sales grew at the fastest pace since 2002 in October, helped by colder weather and Halloween, official figures revealed on Thursday. According to the Office for National Statistics, total sales volumes rose 1.9% last month, following the preceding month's upwardly revised gain of 0.1% and surpassing the 0.5% increase forecast. On an annual basis, retail sales climbed 7.4% in October, posting the strongest pace since April 2002. The October figures provide further evidence that consumer confidence stays relatively intact after the Brexit vote. Retail sales data tend to be extremely volatile month-over-month; however, they grew 5.9% in the three months to October compared to a year ago. Clothing sales increased 5.1% on a monthly basis, the largest gain since March 2014.
Nevertheless, earlier this week Mark Carney, Governor of the Bank of England, said that prices will rise markedly in the upcoming months amid the steep fall in the value of the Sterling. Moreover, the Bank of England now expects inflation to hit 2.7% next year. After the release, the British Pound rose to $1.2507 before falling back to $1.2480. Against the Euro, it advanced to 85.77 before declining back to 85.93.
No fundamental events until November 22
There are no important fundamental events due on Friday, with exception of the US CB Leading Indicator. The Leading Indicator measures future trends of the overall economic activity including employment, average manufacturing workweek, initial claims, permits for new housing construction, stock prices and yield curve. It is considered as a measure for economic stability in the US. This event generates some volatility for the USD. A number of US officials are also scheduled to speak today. Their speeches could also have some impact on the GBP/USD pair's performance today.
GBP/USD risks falling under 1.24
For the fourth consecutive day yesterday the American Dollar outperformed the Pound, but with the immediate support cluster remaining intact. The same area, represented by the weekly S1, the monthly PP and the 20-day SMA, keeps providing sufficient support, preventing the Sterling from falling under 1.2370. Consequently, losses are unlikely to exceed 50 pips, although a breach of the immediate support cluster could send the pair all the way down to 1.23 or even lower, as the second target will be the weekly S2 at 1.2225. On the other hand, technical indicators keep giving bullish signals today, suggesting the closest demand area is to trigger a rebound.
Daily chart
Ever since the breach from the rising wedge pattern, the GBP/USD currency pair appears to have entered a period of stagnation, with volatility contained between the 1.2380 level from the downside and the 1.25 level from the upside. However, risks are still skewed to the downside, being that the bearish momentum usually prevails after wedges' support lines are broken.
Hourly chart
Traders mostly bullish
Market sentiment improved further, as 67% of traders are now long the Pound. Meanwhile, there are 65% of pending orders to sell the Sterling.
A similar situation is observed elsewhere. For example, 62% of positions open at OANDA are currently long. This is more than the share of shorts (38%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 66% of traders being long and 34% 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 18 is 1.2294. Furthermore, the 1.18-1.20 interval is now the most popular one, having 17% of the votes. On the second place in terms of the votes are the 1.16-1.18 (13%) and the 1.26-1.28 (13%) intervals, followed also by the 1.20-1.22 intervals with only 11% of the votes. Moreover, 60% all survey participants believe the Cable is to fall under 1.24.