- The share of buy orders inched up from 47 to 51%
- 73% of traders hold long positions
- Immediate resistance is around 1.23
- The closest support is at 1.2184
- Upcoming Events: US Initial Jobless Claims, US Import Prices, US Federal Budget Balance
British industrial production posted the biggest monthly gain since March 2016, while manufacturing production rebounded from the preceding month's fall. According to the Office for National Statistics, UK manufacturing output rose 2.1% in November, following October's upwardly revised fall of 1.3%, the largest since 2012. This jump significantly exceeded analysts' expectations for a 0.8% rise in the reported month. In the meantime, manufacturing production advanced 1.3% in November, up from a 1.0% drop in the past month, surpassing forecasts for a 0.5% increase. There was a strong gain of 11.4% in the pharmaceutical sector, which tends to be highly volatile month-over-month. Overall, the November increase was mainly driven by increasing oil prices and gas extraction, as the Buzzard field resumed production after it was shut down for maintenance works.
Furthermore, unusually cold weather boosted demand for heating. On a yearly basis, manufacturing production climbed 1.2%, whereas industrial production advanced 2.0% as output surged across all major sectors. As a result, the British Pound rose shortly against other major currencies. However, it failed to maintain gains, falling back to 0.8700 against the Euro and 1.210 against the Greenback.
US fundamentals in focus
There are no significant events from the UK side scheduled for today, thus, attention turns to the US data, namely the Import Prices and the Monthly Budget Statement. Initial Jobless Claims are also due today, but they tend to have close to no impact on the exchange rates. As for the Import Prices, they inform the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise. The Monthly Budget Statement, however, summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD.
GBP/USD on the edge of negating Monday's losses
A rather unexpected turn of events, namely the tone of the US President-Elect's press conference, caused the Cable to recover from its intraday low yesterday and even close trade above the 1.22 mark. The GBP/USD pair is now expected to retain yesterday's strength and post more gains today, but with the exchange rate doubtfully climbing over the 1.23 mark, as the 20-day SMA and the weekly PP form a relatively strong resistance there. Furthermore, technical studies are no longer showing bearish signals, creating a possibility for the positive scenario to prevail. Given that no further political event influences the Pound today, another close in the green zone is more than likely.
Daily chart
Yesterday's surge caused the GBP/USD pair to climb over the 1.22 mark, but with the 200-hour SMA limiting the volatility and preventing further upside movement. Nevertheless, the Cable's second attempt was more successful, as it managed to breach the given SMA. Assuming the Pound stabilizes above the 1.2250 level, all last week's losses could be erased by the end of this week.
Hourly chart
Traders mostly bullish
Nearly three quarters (73%) of all open positions are now long (previously 72%). The share of buy orders inched up from 47 to 51%.
A similar situation is observed elsewhere. For example, 67% of positions open at OANDA are currently long. This is more than the share of shorts (33%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 60% of traders being long and 40% 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 67% of survey participants believe so. While the current price is around 1.22, the average forecast for April 12 is 1.2194. However, the 1.20-1.22 interval is now the most popular one, having 17% of the votes, while on the second place is the 1.14-1.16 price range, with 15% of poll participants choosing it. Furthermore, the 1.18-1.20 interval was chosen by 13% of the voters.