- The portion of buy orders increased from 42 to 62%
- Market sentiment remains bullish at 64%
- Immediate resistance is at 1.2240
- The closest support is around 1.2120
- Upcoming Events: US FOMC Meeting Minutes, UK Services PMI, US ADP Non-Farm Employment Change, US Initial Jobless Claims, US Services PMI
The Manufacturing Purchasing Managers' Index climbed to 56.1 in December, up from 53.6 in November, official figures revealed on Tuesday. Meanwhile, market analysts anticipated a slighter decrease to 53.3 during the reported period. UK manufacturing activity was also well ahead the long-term average of 51.5, pointing to a rise of confidence in the sector. The December PMI was supported by higher exports, which advanced at the strongest rate since 2014, as the Sterling continued to boost overseas demand. Order backlogs also made a slight rise for the first time in three years, which is expected to support an increase in confidence in trends of near-term production. This was the fifth month of growth in employment and capacity that stimulated pace of job expansion in the last 14 months. The increase in input costs remained unchanged in December, though it was slower than in October. Output costs also increased for the eighth successive months.
The data is set to sustain confidence in the PMI outlook and keep the Bank of England's key interest rates at the present levels amid higher inflation and strength in the services sector. After the release, the Euro slid against the Pound to trade at 0.8470, although the Cable traded at 1.2300 on the US Dollar's broader strength.
FOMC Meeting Minutes is the only upcoming relevant event today
There are no upcoming important fundamental data releases, thus, all focus turns to the FOMC Meeting Minutes later today. FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.
GBP/USD attempts to reclaim the 1.23 mark
As was anticipated, the Cable experienced another leg down on Tuesday, with the 1.22 mark limiting the volatility. Technically, the Sterling should now undergo a bullish correction, despite having two resistances on its path: the weekly S1 at 1.2240 and the weekly PP at 1.2314. Another sign of possible negative outcome are the technical indicators, which now suggest another decline is due. Nevertheless, fundamentals could provide a sufficient boost for the Pound today, with a rally seen as far as the 1.2350 mark. However, there are doubts a close above the 1.23 level is possible and the weekly PP getting pierced.
Daily chart
With the Cable now located within the borders of a descending channel pattern, the exchange rate is expected to eventually go down. A slight bullish correction today is possible, with either the 200-hour SMA limiting the gains or the channel's upper trend-line, before bears take over again.
Hourly chart
Traders mostly bullish
Market sentiment remains bullish at 64% today. At the same time, the portion of buy orders increased significantly, namely from 42 to 62%.
A similar situation is observed elsewhere. For example, 65% of positions open at OANDA are currently long. This is more than the share of shorts (35%), 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 the Cable to keep falling
By the end of the next three months traders expect the Cable to fall under the 1.24 major level, as 63% of survey participants believe so. While the current price is around 1.23, the average forecast for April 04 is 1.2308. However, the 1.18-1.20 interval is now the most popular one, having 17% of the votes, while on the second place are the 1.20-1.22 and the 1.22-1.24 price ranges, with 13% of poll participants choosing each of them. Furthermore, the 1.14-1.16, the 1.16-1.18 and the 1.28-1.30 intervals were chosen by 10% of the voters each.