- The portion of orders to sell the Pound increased from 53 to 56%
- 59% of traders hold long positions
- Immediate resistance is at 1.2537
- The closest support is circa 1.2450
- Upcoming Events: US Labor Market Conditions Index, US JOLTS Job Openings, US Trade Balance, UK Halifax HPI, US Consumer Credit
The services sector activity in Britain slowed unexpectedly during the first month of 2017, a private survey revealed on Friday. Markit/CIPS reported its Purchasing Managers' Index for the UK services sector fell to 54.5 points in January after hitting 56.2 in December, the highest level since July 2015, when it climbed to 57.4. Market analysts anticipated a slighter decrease to 55.8 in the reported month. Last month's reading recorded the first slowdown in the UK services industry in four months.
However, it remained comfortably above the 50-point level separating expansion from contraction. Britain's service industry is closely monitored, as it accounts for almost 80% of the economy. According to the Markit Services PMI survey, companies expressed greater optimism about the future of the services sector. Nevertheless, businesses once again pointed to rising inflationary pressures due to the sharp fall in the value of the Sterling. The weak domestic currency is likely to push inflation to 2.7% in 2018, above the Central bank's target of 2%, the BoE Governor Mark Carney said on Thursday. Although the Bank said its tolerance for above-target inflation would be limited. After the release, the Pound dropped markedly against other major currencies, trading at 1.1630 against the Euro and 1.2494 against the US Dollar.
Uneventful Monday
Monday is a very quiet day in terms of fundamental events, with the only relative one being the US Labor Market Conditions Index. It shows the change in the level of composite index based on 19 labor market indicators, however, this event tends to have close to no impact on the forex market, as most of the indicators used in its calculation have already been released.
GBP/USD struggles to reclaim 1.25
The Cable closed with a 40-pip loss on Friday, as mixed US fundamentals were unable to cause a breach in the tough demand cluster around 1.2450. Nevertheless, the GBP/USD pair slipped back under the 1.25 major level, now seeking its way to recover with the help of the same demand area. Technical indicators are in favour of the positive outcome, as they keep giving bullish signals in the daily timeframe. However, we should not rule out the possibility of the pair partially breaching the support cluster, as political factors keep pressuring the British Pound.
Daily chart
The British currency keeps trying to edge higher against the US Dollar, but is unable to reach the Dec 2016 high of 1.2775. Political factors keep pressuring the Sterling and the 200-hour SMA is failing to provide support. Unless the Cable successfully reclaims the 1.27 level in the upcoming days, more bearish momentum could arise.
Hourly chart
Traders mostly bullish
There are 59% of traders holding long positions today (previously 60%). Meanwhile, the portion of orders to sell the Pound increased from 53 to 56%.
A slightly less optimistic situation is observed elsewhere. For example, 56% of positions open at OANDA are currently long. This is more than the share of shorts (44%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank improved over the day, with 58% of traders now being long and the other 42% 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 rise above the 1.22 major level, as 52% of survey participants believe so. While the current price is around 1.25, the average forecast for May 06 is 1.2327. However, the 1.14-1.16 interval is now the most popular one, having 16% of the votes, while on the second place are the 1.16-1.18, 1.20-1.22, 1.24-1.26 and the 1.30-1.32 price ranges, with 11% of poll participants choosing each of them. Furthermore, the 1.18-1.20 and the 1.26-1.28 intervals were each chosen by 10% of the voters.