- The share of buy orders edged up from 50 to 56%
- 68% of all open positions are long
- Immediate resistance is at 1.2201
- The closest support is around 1.2110
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Upcoming Events: US CPI and Core CPI, US Retail Sales and Core Retail Sales, Federal Funds Rate
The seasonally adjusted Producer Price Index for final demand rose 0.3% in February, the Bureau of Labour Statistics revealed on Tuesday. Over 80% of the increase in final demand Index was associated with 0.4% advance in prices for final demand services. The Index for final demand goods, in contrast, advanced only 0.3%. The surge in final demand services was mainly driven by traveller accommodation services, which increased 4.3%, while the rise in final demand goods was mostly attributable to higher electric power prices, which rallied 1.6%. In general, the price advance for total final demand in February was half of the January rise. With respect to intermediate demand, prices for unprocessed goods plunged 0.2%, while prices for processed goods jumped 0.4% and prices for services climbed 0.5%. Prices of processed goods posted the sixth straight monthly increase, driven by a 0.5% spike in prices for processed materials less foods and energy.
In contrast, the surprising fall of prices for unprocessed goods was attributed to a 4.3% drop in the price of unprocessed energy materials. In terms of products, the rise of prices for processed goods was attributable to higher demand for primary basic organic chemicals and higher services prices. The slip of prices for unprocessed goods was triggered by lower natural gas prices, which went 18% down.
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US CPI, Retail Sales and Federal Funds Rate decision
A number of important US fundamentals is due today, such as the CPI and Retail Sales. The CPI 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 USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. The Core CPI, however, excludes volatile products, such as food and energy, in order to capture an accurate calculation. Meanwhile, the US Retail Sales measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core figure excludes the automobile sector. Nevertheless, the most important event today is the Federal Funds Rate decision. With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one being the interest rate that it will charge on loans and advances to commercial banks. In the US the Board of Governors of the Federal Reserve meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost local currency, as it is understood as a sign of a healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency. If rates remain unchanged, attention turns to the tone of the FOMC Statement, and whether the tone is hawkish or dovish over future developments of inflation.
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GBP/USD in limbo around 1.22 ahead of Fed Minutes
The GBP/USD pair was close to touching the 1.21 mark on Tuesday, the lowest level in two months; however, it was able to stabilise above the 1.2150 mark. A sharp rebound was registered earlier today, but the cause of it is USD weakness rather than GBP strength, with US Treasury yields weighing on the US currency. A lot can change after Fed's Minutes are released, which is the main market driver today. First of all, the Cable risks falling under 1.21, should the Fed deliver on a rate hike and provide insight concerning future ones this year. On the other hand, any disappointment would help the Pound regain some ground, with the 1.23 easily seen retaken.
Daily chart
© Dukascopy Bank SA
Due to another spark of bullish momentum, the GBP/USD pair managed to take another shot at climbing over the 200-hour SMA, which was bolstering the 1.22 psychological level. The hourly chart is unable to provide any additional information, with exception of the indication that the Cable is now capable of posting more gains.Hourly chart
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Traders mostly bullish
Bullish traders' sentiment grew stronger, as now 68% of all open positions are long. The share of buy orders edged up from 50 to 56%.
A slightly more optimistic situation is observed elsewhere. For example, 67% of positions open at OANDA are currently long. This is more than the share of shorts (33%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 68% of traders now being long and the other 32% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
© Dukascopy Bank SABy the end of the next three months traders expect the Cable to fall under the 1.22 major level, as 52% of survey participants believe so. While the current price is around 1.22, the average forecast for June 15 is 1.2342. The 1.18-1.20 and the 1.20-1.22 ranges are now the most popular price intervals, with all three having 15% of the votes, while on the second place are 1.14-1.16 and the 1.28-1.30 price ranges, both with 13% of poll participants choosing them. Furthermore, the 1.30-1.32 interval was chosen by 11% of the voters.