- 61% of all pending orders are to sell the Pound
- 69% of all open positions are long
- Immediate resistance is around 1.2330
- The closest support is at 1.2184
- Upcoming Events: US Labor Market Conditions Index, US Consumer Credit, US JOLTS Job Openings
The US economy created less jobs than expected in the last month of 2016, disappointing markets. The US unemployment rate rose in line with analysts' expectations from 4.6% to 4.7%, while the participation rate climbed from 62.6% to 62.7%. The report also showed US nonfarm payrolls advanced 156,000, while markets anticipated a gain of 177,000, following the previous month's increase of 178,000. Official data published by the Bureau of Labor Statistics showed manufacturing employment advanced 17,000 in December, despite small decreases in two previous months. In the meantime, there was also a slight fall in construction jobs and decline of over 15,000 in temporary help-services jobs. Nevertheless, government employment increased 12,000. In the meantime, the BLS said the Average Earnings Index jumped 0.4%, compared to a 0.1% decrease in November, which boosted the annual rate from 2.5% to 2.9%, the strongest gain since June 2009. Despite mixed economic indicators, the data is likely to maintain confidence in the job market and analysts' expectations for the Federal Reserve's rate hikes in 2017.
After the report, the US Dollar strengthened immediately. The EUR/USD pair dropped to 1.0550, while the USD/JPY held steady at 116.50.
Quiet start of the week
The beginning of this weak is going to be rather quiet, with only one event worth paying attention to scheduled today, namely the US Consumer Credit change. It is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means.
GBP/USD remains on the back foot
Brexit issues continued to weigh on the British currency on Friday, with even weak US fundamental data being insufficient to help the Cable erase its intraday losses. As a result, the GBP/USD pair dropped more than 100 pips on Friday, sliding back under the 1.23 mark. Moreover, the pair opened with a small bearish gap today, with the downside pressure remaining. The closest area to prevent the Sterling from sliding further down is the 1.22 psychological support, which managed to limit downside volatility so far. The weekly S1 is also bolstering this threshold, while technical indicators do bring some additional support, as they are unable to confirm the possibility of the negative outcome.
Daily chart
The 200-hour SMA failed to hold the Cable afloat on Friday, resulting in the Pound adding more bearish momentum today. On the hourly chart the psychological support of 1.22 has already been pierced, with no signs of a potential recovery present.
Hourly chart
Traders mostly bullish
More than three quarters (69%) of all open positions are long today, whereas 61% of all pending orders are to sell the Pound (up from 58%).
A similar situation is observed elsewhere. For example, 66% of positions open at OANDA are currently long. This is more than the share of shorts (34%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 63% of traders being long and 37% 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 69% of survey participants believe so. While the current price is around 1.23, the average forecast for April 09 is 1.2244. However, the 1.20-1.22 interval is now the most popular one, having 17% of the votes, while on the second place are the 1.18-1.20 and the 1.22-1.24 price ranges, with 15% of poll participants choosing it. Furthermore, the 1.14-1.16 and 1.16-1.18 intervals were chosen by 11% of the voters each.