- 59% of all pending orders are to sell the Pound
- 58% of all open positions are long
- Immediate resistance is around 1.2718
- The closest support is circa 1.2687
- Upcoming events: UK Services PMI, US Services PMI, US Labor Market Conditions Index
The US unemployment rate fell to a nine-year low in November, adding to expectations that US interest rates will rise later this month. Figures from the Labor Department showed the US economy created 178,000 jobs in November, while the jobless rate fell to 4.6% from 4.9% in October. The first employment report since voters went to the polls last month shows an economy in strong shape as President-elect Donald Trump prepares to take office. The unemployment rate fell to levels not seen since August 2007, before a bubble in the U.S. housing market began to burst. The fall was driven partly by the creation of new jobs and partly by people retiring and otherwise leaving the labor force.
In addition, average hourly earnings in the US fell more-than-expected last month touching a seasonally adjusted -0.1%, from 0.4% in the preceding month. The data release comes ahead of the Fed's meeting, when the central bank is expected to announce its first interest rate increase in a year. Although wages fell slightly in November, many economists view the steady wage gains of the earlier months as a sign that a tightening labor market is allowing workers to demand higher pay, increasing pressure on the Fed to head off inflation by hiking interest rates.
UK and US Services PMIs in focus
Today attention turns to the Services PMI data both from the UK and the US. The UK Services PMI is released by both the Chartered Institute of Purchasing & Supply and the Markit Economics. It is an indicator of the economic situation in the UK services sector. It captures an overview of the condition of sales and employment. It is worth noting that the UK service sector does not influence, either positively or negatively, the GDP as much as the Manufacturing PMI does. Traders want the highest possible reading, as that will be taken as positive for the GBP. As for the US Services PMI, it is released by Markit Economics and the Institute for Supply Management.
GBP/USD to reach a new two-month high
Relatively disappointing US employment figures on Friday allowed the British Pound to add more than 140 pips against the Greenback, causing the Cable to climb over the 1.27 major level. Today the GBP/USD currency pair opened with a small bearish gap, but despite that the Sterling is still likely to inch higher, as technical indicators in the daily timeframe suggest. The only obstacle on the Cable's path is the monthly R1 at 1.2718, but after Friday's breach of this resistance the pair is expected to ignore this area and successfully stabilise at a fresh eight-week high.
Daily chart
The Cable has been rapidly gaining ground and has formed what appears to be another rising wedge pattern within the larger scale one. Should the rising wedge marked with stroking lines prove to be viable – the exchange rate should fall within two upcoming days and make its way towards the 200-hour SMA if not to the up-trend at 1.2450.
Hourly chart
Traders mostly bullish
Market sentiment barely changed over the weekend, as now 58% of all open positions are long, down from 59% on Friday. Meanwhile, the portion of orders to sell the Pound remains unchanged at 59%.
A similar situation is observed elsewhere. For example, 60% of positions open at OANDA are currently long. This is more than the share of shorts (40%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 55% of traders being long and 45% 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 March 05 is 1.2503. Furthermore, the 1.16-1.18 interval is now the most popular ones, having 13% of the votes. On the second place in terms of the votes is the 1.30-1.32 (11%) interval, followed also by the 1.18-1.20, 1.22-1.24, 1.24-1.26, 1.26-1.28, 1.28-1.30 and 1.32-1.34 intervals, all with only 9% of the votes. Moreover, 55% all survey participants believe the Cable is to fall above 1.24.