- 63% of all pending orders are to sell the Sterling
- Exactly three quarters of traders are long the Pound
- Immediate resistance is around 1.75
- The closest support is at 1.1949
- Upcoming Events: BoE Carney's Speech, UK CPI, UK RPI, UK PPI Input, UK May's Speech
In the United Kingdom, demand for bank lending among small and medium-sized enterprises dropped in the last quarter of 2016 in the wake of the country's decision to leave the European Union, according to the Bank of England's quarterly Credit Conditions Survey released on Friday. Furthermore, British banks suggested that the demand for bank credit by SMEs will remain low in the upcoming months. In the meantime, the demand for credit among large businesses remained unchanged in the reported quarter, following a large slip posted in the preceding quarter. In addition, the Bank said the availability of secured credit for households held steady in the last three months of 2016 and is likely to rise moderately in the first quarter of 2017. Despite an increase in the availability of unsecured credit in the past quarter, it is expected to fall during the first quarter of 2017 due to stricter terms and conditions of credit card offers introduced in the three month period to December.
The Bank of England was looking for signs of damage to British companies, business investment and overall economic growth after the vote to leave the European Union. The survey was carried out between November 21 and December 9.
BoE Carney's Speech is the only event on Monday
Today there are no fundamental news releases to focus on, but the BoE Governor's speech could cause strong volatility to GBP crosses. Nevertheless, tomorrow attention should be paid to the UK's inflation data, such as the CPI. It is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Another reading to look at will be the PPI Input, which is a monthly measurement of the rate of inflation experienced by the UK manufacturers when buying goods and services. It captures changes in the average price of a fixed basket of goods and services purchased by the UK Manufacturers. However, the most impact is to have UK Prime Minister's speech tomorrow, as the Brexit topic is expected to be discussed, which could send the Pound plummeting again.
GBP/USD attempts to recover from weekend's drop
Although the British currency managed to edge higher against the US Dollar on Friday, it still failed to maintain trade above the 1.22 level. Nevertheless, the 1.2150 threshold was preserved, but the Cable opened with a hard bearish gap today, now barely managing to hold above 1.20. Political factors, namely UK's access to the single market after Brexit is fully implemented, keep weighing on the Pound. Nevertheless, the Sterling is likely to erase some of the losses that occurred during the gap, while the weekly S1 acts as the closest resistance at 1.2045, which could prevent the GBP/USD pair from recovering.
Daily chart
The Cable failed to stabilise above the 200-hour SMA, ultimately falling below 1.21, as it is seen on the hourly chart. Tomorrow's events could trigger more GBP-selling, which could result in a plunge towards the 1.18 level, where the wedge's lower border is located.
Hourly chart
Traders mostly bullish
Exactly three quarters of traders are now long the Pound, whereas 63% of all pending orders are to sell it.
A similar situation is observed elsewhere. For example, 70% of positions open at OANDA are currently long. This is more than the share of shorts (30%), 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 68% of survey participants believe so. While the current price is around 1.20, the average forecast for April 16 is 1.2169. However, the 1.14-1.16 interval is now the most popular one, having 17% of the votes, while on the second place are the 1.16-1.18, the 1.18-1.20 and the 1.20-1.22 price ranges, with 13% of poll participants choosing each of them. Furthermore, the 1.22-1.24 interval was chosen by 12% of the voters.