- The share of sell orders edged down from 57 to 54%
- 62% of traders are long the Pound
- Immediate resistance is at 1.2537
- The closest support is circa 1.2440
- Upcoming Events: Crude Oil Inventories, US Initial Jobless Claims, US Wholesale Inventories
House prices in the United Kingdom dropped unexpectedly last month, official figures revealed on Tuesday. Halifax reported its House Price Index, the longest running monthly house price measure, plunged 0.6% in January, following the preceding month's downwardly revised increase of 1.6%, while market analysts expected house prices to grow at a 0.2% pace in the reported month. The January figure marked the first monthly decline since the Brexit vote. On an annual basis, prices climbed 5.7% last month, down from December's 6.5% and below economists' forecasts. In a report, Halifax said that a lack of properties for sale, low interest rates and slow building activity would push house prices higher in the upcoming months.
However, it also stated that subdued economic growth and rising pressure on consumer spending could probably weaken house price growth. In January, the average house price was 220,260 pounds. Last week, the British mortgage lender Nationwide said the average house price rose 0.2% on a monthly basis in January, following the previous month's 0.8% increase. Year-over-year, house prices grew at a 4.3% pace last month, the weakest since November 2015, compared to the December increase of 4.3%. According to Nationwide, the housing market would lose some momentum going forward.
No important events until Friday
This whole weak is quiet in terms of fundamental data releases, leaving the main ones to be released on Friday. First of all the UK Manufacturing Production, which measures the manufacturing output. It is significant as a short-term indicator of the strength of the UK manufacturing activity that dominates a large part of total GDP. Similarly, Industrial Production measures outputs of the UK factories and mines. Changes in Industrial Production are widely followed as a major indicator of strength in the manufacturing sector. From the US side attention could be paid to the Import Price Index. It informs 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.
GBP/USD keeps riding the 100-day SMA wave
The British currency surprised with its performance on Tuesday, having fully recovered from its intraday low of 1.2350 and closed above the 1.25 mark. However, the Cable was still unable to climb over the immediate resistance, namely the weekly PP, which continues to provide resistance today. The Pound still remains on the back foot, risking to edge lower once more. The tough demand area around 1.2440 is expected to prevent the GBP/USD pair from sustaining sharper losses, mainly the 100-day SMA, as it has done so on several occasions.
Daily chart
The Cable's sudden recovery caused the 1.25 level to be retaken, but with further gains limited by the 200-hour SMA. It keeps providing relatively strong resistance, preventing the pair from edging higher. A catalyst is required for the Sterling to pierce the resistance, until that is provided, the exchange rate is expected to remain below the 200-hour SMA either in consolidation or testing the nearest supports.
Hourly chart
Traders mostly bullish
Bulls keep gaining numbers, as today 62% of traders are long the Pound and the remaining 38% are short. As for the pending orders, the share of sell ones edged lower from 57 to 54%.
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 is also bullish, with 56% of traders now being long and the other 44% 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 51% of survey participants believe so. While the current price is around 1.25, the average forecast for May 08 is 1.2319. However, the 1.14-1.16 interval is now the most popular one, having 15% of the votes, while on the second place is the 1.20-1.22 price range, with 12% of poll participants choosing it. Furthermore, the 1.16-1.18, 1.18-1.20, 1.24-1.26 and the 1.26-1.28 intervals were each chosen by 11% of the voters.