- The share of sell orders inched down from 58 to 55%
- 63% of traders have a positive outlook towards the British currency
- Immediate resistance is around 1.2450
- The closest support is at 1.2330
- Upcoming events: UK Public Sector Net Borrowing, US Existing Home Sales, US Crude Oil Inventories
Both building permits and housing starts dropped more than expected last month, suggesting that the Q4 growth rate could be possibly revised downwards. According to the US Department of Commerce, new-home construction fell 18.7%, the biggest decrease in almost two years, to a seasonally adjusted annual rate of 1.09 million units in November, while market analysts anticipated a slight deceleration to 1.23 million during the reported period. Housing starts tend to be volatile on a monthly basis. Meanwhile, the October figure was revised up to a 1.34 million-unit pace, the highest level since July 2007, from the originally reported 1.32 million. The Commerce Department also reported that building permits declined 4.7% to an annualized rate of 1.20 million units, following October's upwardly revised reading of 1.26 million, whereas economists expected them to decrease to a 1.24 million-unit pace.
Nevertheless, the National Association of Homebuilder's sentiment measure, released on Thursday, jumped to 70 points in December, the highest level in 11 years, compared to the previous month's figure of 63. December's increase was driven in large part by Donald Trump's surprise victory in the US presidential elections last month.
US Existing Home Sales unlikely to have a serious impact
There are no significant events due until Thursday, however, today some attention could be paid to the US Existing Home Sales. They are released by the National Association of Realtors and provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. Generally speaking, a high reading is positive for the Dollar, while a low reading is negative. The change is expected to be minor, thus, having a very limited effect on USD pairs.
GBP/USD risks falling to a fresh seven-week low
Yesterday the GBP/USD currency pair experienced rather substantial downside volatility, with the exchange rate almost reaching the 1.23 major level, but ultimately closing above the immediate support area. The Pound remains on the back foot today, with the weekly S1 and the lower Bollinger band still forming a relatively strong demand area just above the 1.23 mark. The possibility of a positive outcome is even lower today, being that technical indicators are no longer giving bullish signals in the daily timeframe. In case the Cable drops under the 1.23 level, the next target will be the monthly S1, located at 1.2251.
Daily chart
The Cable has been sliding down ever since it broke out of the rising wedge pattern three weeks ago, also piercing a broadening rising wedge's support line during the previous week. The bearish momentum lasted for quite some time now, but with no solid support on the way, that could certainly cause the pair to recover.
Hourly chart
Traders mostly bullish
Today 63% of traders have a positive outlook towards the British currency, compared to 62% on Tuesday. At the same time, the share of sell orders inched down from 58 to 55%.
A similar situation is observed elsewhere. For example, 56% of positions open at OANDA are currently long. This is more than the share of shorts (44%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 62% of traders being long and 38% 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 21 is 1.2583. Furthermore, the 1.28-1.30 and the 1.30-1.32 intervals are now the most popular ones, having 14% of the votes each. On the second place in terms of the votes are the 1.16-1.18 (12%), 1.18-1.20 (12%) and 1.24-1.26 (12%) intervals, followed also by the 1.32-1.34 interval, with only 10% of the votes. Moreover, 60% all survey participants believe the Cable is to fall above 1.24.