- The share of sell orders edged higher up from 56 to 57%
- 60% of all open positions are long
- Immediate resistance is at 1.2537
- The closest support is circa 1.2450
- Upcoming Events: 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.
Relatively quiet Tuesday, secondary US fundamentals due
On Tuesday attention turns to the US fundamentals, such as the Trade Balance. It is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an even that generates some volatility for the USD. If a steady demand in exchange for US exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the USD. Another event that could have some impact is the Consumer Credit. 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 continues to slide
The GBP/USD currency pair weakened for the third consecutive time on Monday, but managed to remain above the immediate support cluster. Even though this cluster keeps providing strong support today, the Sterling still remains on the back foot. As a result, the Cable is expected to close in the red zone again; however, a full-blown breach of the immediate demand area is unlikely. The Pound is expected to stabilise somewhere between 1.2430 and 1.2415, unless fundamental data turns into Sterling's favour. Meanwhile, technical indicators are unable to confirm either scenario, as they retain mixed signals.
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
Market sentiment remains moderately bullish, being that 60% of all open positions are now long (previously 59%). The share of sell orders edged higher again, namely from 56 to 57%.
A slightly less optimistic situation is observed elsewhere. For example, 58% of positions open at OANDA are currently long. This is more than the share of shorts (42%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank remains unchanged, 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.