- The share of buy orders dropped down from 62 to 47%
- 61% of traders are bulls
- Immediate resistance is around 1.24
- The closest support is around 1.2314
- Upcoming Events: US ADP Non-Farm Employment Change, US Initial Jobless Claims, US Services PMI, US Crude Oil Inventories
UK construction activity advanced at the fastest pace in nine months in December, supported by a rise in house building, a survey revealed on Wednesday. Markit/CIPS said its Construction PMI for Britain increased unexpectedly to 54.2 points during the reported period. This was its highest rate since March, while market analysts anticipated expected the Index to remain unchanged at the preceding month's reading of 52.8. The latest surveys for the construction and manufacturing industries suggest that the British economy gained momentum by the end of 20016.
However, the UK Services PMI for December, scheduled to be released on Thursday, is expected to paint a better picture of Britain's economy, as the services sector accounts for almost 80% of the economy. The survey also pointed to rising price pressures in the sector amid a steep fall in the valued of the British Pound. According to Markit, building costs jumped at their strongest pace since April 2011 last month, as well as numerous companies reported excess demand for materials. Even though the UK economy was among the best performing in the world last year, it is projected to grow just 1.1% in 2017 due to higher inflation. Back in December, house building grew at the fastest pace since January, and may get a boost going further if the government's plan to build 200,000 new homes achieves success.
US ADP Non-Farm Employment Change and Services PMI
On Thursday attention turns to the US ADP Non-Farm Employment Change. It is a measure of the change in the number of employed people in the US. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth, so a high reading is traditionally seen as positive or bullish for the USD, while a low reading is seen as negative or bearish. Another event that could have some impact on the Cable will be the US Services PMI. It captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the Services PMI is an important indicator of the overall economic condition in the US.
GBP/USD remains on the back foot
The British Pound managed to outperform the American Dollar on Wednesday, not only climbing over the 1.23 mark, but also piercing the second resistance level. The Cable, however, keeps gravitating towards the 1.23 level for a few weeks now; therefore, another leg down is expected. Consequently, the Sterling is likely to slump back under 1.23, with focus shifting to the second support level once again, namely the weekly S1. Overall, the 1.22 major level is the main target, where the given pair could receive sufficient support for a rebound or breach it and continue moving towards 1.21, where a tough demand area is located. Technical studies are unable to confirm this scenario.
Daily chart
Yesterday's rally caused the GBP/USD pair to breach the channel's resistance line, with the 1.2360 mark being reached eventually today. However, the Pound appears to have lost its short-term bullish momentum, as it fell under rather sharp selling pressure and slipped back below 1.23. The 200-hour SMA could provide some support, but the channel's resistance line lost its viability.
Hourly chart
Traders mostly bullish
Today 61% of traders are bulls, compared to 64% yesterday. At the same time, the share of buy orders dropped down from 62 to 47%.
A similar situation is observed elsewhere. For example, 64% of positions open at OANDA are currently long. This is more than the share of shorts (36%), 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 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 65% of survey participants believe so. While the current price is around 1.23, the average forecast for April 05 is 1.2292. However, the 1.18-1.20 interval is now the most popular one, having 17% of the votes, while on the second place is the 1.20-1.22 price range, with 15% of poll participants choosing it. Furthermore, the 1.22-1.24 interval was chosen by 13% of the voters.