- The number of sell orders remains unchanged at 53%
- 61% of all open positions are long
- Immediate resistance is around 1.2613
- The closest support is circa 1.2510
- Upcoming Events: US New Home Sales, Reuters/Michigan Consumer Sentiment
The number of Americans filing for unemployment benefits increased slightly more than expected last week, though the four-week average dropped 4,000 to 241,000, weakest level since 1973, official figures revealed on Thursday. Last week's results were driven by growing economy and tight labour market, which is likely to prompt companies to retain experienced workers, supporting wage growth. According to the US Department of Labour, national jobless claims rose 6,000 to 244,000 during the week ended February 17 from the preceding week's upwardly revised 238,000.
Meanwhile, economists anticipated an acceleration to 242,000 during the reported period. Filings have been holding below 300,000 for 103 straight weeks, showing healthy signs of the US job market. In the meantime, continuing claims fell 17,000 to 2.06 million during the week ended February 11, while their four-week moving average dropped 10,750. Overall, the Federal Reserve is widely expected to increase interest rates fairly soon, with labour market and inflation data set to reveal better performance. The last time the Fed raised its benchmark overnight rate was in December last year, when the rate was increased from 0.5% to 0.75%.
US New Home Sales is the only event today
Friday is also a quiet day in terms of fundamental data releases, with the only relevant event being the US New Home Sales. The New Home Sales is an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes, so as a result the demand for goods, services and employees is stimulated. However, on Monday traders can focus on the US Durable and Core Durable Goods orders data release, as well as Pending Home Sales.
GBP/USD: correction anticipated
The Cable not only reached its target on Thursday, but even managed to close trade at the highest level in nearly three weeks. However, the reason for the substantial rally was not the Sterling's strength, but US Dollar's weakness. Consequently, a bearish correction could easily occur today, with the exchange rate retreating towards 1.25—where the 20-day SMA and the weekly R1 rest. Technical studies, on the other hand, suggest another positive outcome is due, in which case the main target would be the resistance area around 1.2613, formed by the upper Bollinger band and the weekly R2.
Daily chart
The Cable somewhat behaved in accordance with expectations yesterday, as it breached the bearish trend-line, but soared much more than was anticipated. The pair appears to have topped out at 1.2570, from which the correction is likely to begin. The intraday bottom level is expected to be the 1.2480 mark, although this is to occur if external factors weigh on the Pound or boost the US Dollar.
Hourly chart
Traders mostly bullish
Bulls gained some numbers over the day, as now 61% of all open positions are long, compared to 57% on Thursday. Meanwhile, the number of sell orders remains unchanged at 53%.
A slightly less optimistic situation is observed elsewhere. For example, 52% of positions open at OANDA are currently long. This is more than the share of shorts (48%), 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 58% of survey participants believe so. While the current price is around 1.25, the average forecast for May 24 is 1.2587. The 1.20-1.22 interval is now the most popular price interval, having 23% of the votes, while on the second place is the 1.34-1.36 price range, with 15% of poll participants choosing it. Furthermore, the 1.18-1.20 and the 1.28-1.30 intervals were each chosen by 11% of the voters.