- The share of purchase orders inched up from 49 to 51%
- Market sentiment remains equally divided between the bulls and the bears
- Immediate resistance is at 1.2932
- The closest support is at 1.2822
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Upcoming events: US Crude Oil Inventories, US Beige Book, Philadelphia Fed Manufacturing Index, US Initial Jobless Claims
US homebuilding activity dropped more than expected last month amid the unusually warm weather and weaker manufacturing activity, official figures revealed on Tuesday. The US Department of Commerce reported that housing starts fell 6.8% to a seasonally adjusted rate of 1.22M, as construction of single-family homes in the Midwest posted the largest decline since 2014. Meanwhile, market analysts anticipated a slighter drop to a 1.25M unit rate in March, following the preceding month's upwardly revised 1.30M unit rate. On an annual basis, housing starts were up 9.2%. Data also showed that building permits climbed to a 1.26M unit rate in March, compared to the previous month's upwardly revised 1.22M unit rate, whereas analysts expected a rise to 1.25M unit rate.
Separately, the Federal Reserve reported that manufacturing output plunged 0.4% in March, driven by a 3.0% decrease in the motor vehicle and part sector. On a yearly basis, manufacturing output advanced 2.7% in the Q1 of 2017. Both reports raised concerns over the Fed postponing its second rate hike this year. Moreover, the data suggested that the US economy performed weaker than expected in the Q1. Following Tuesday's releases, the US Dollar hit its three week low against a basket of major currencies.
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Relatively quiet Wednesday
Among relevant fundamental data today the US Beige Book is probably the most important one. It reports on the currency US economic situation. Through interviews with key business contacts, economists, market experts and other sources, information is gathered by each of the 12 Federal Reserve Districts. The survey gives a picture of the overall US economic growth. An optimistic view of those authorities is considered to be positive for the USD. Tomorrow attention could be paid to the Philadelphia Fed Manufacturing Survey, which is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM Manufacturing Index and the index of industrial production. It is also used as a forecast of the ISM Index.
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GBP/USD to take a breath after Wednesday's rally
UK Prime Minister May's surprise announcement on Wednesday lifted the Sterling, allowing it to gain more than 270 pips against the US Dollar. The six-month down-trend can now be called completely breached, since the resistance cluster around 1.2610 was also easily pierced. However, the Pound encountered some resistance around the 1.29 handle, which is now the new Cable's new target. From this point on the British currency is likely to begin sliding down, undergoing a correction, but the monthly R1 at 1.2743 is expected to provide sufficient support to keep the pair elevated.
Daily chart
The bullish trend-line received a good confirmation yesterday, as the exchange rate soared beyond 1.29 after the Cable retested the up-trend. Unless a correction occurs, the Pound could begin paving its way towards the resistance line around 1.34, but such goal would take quite some time to achieve.Hourly chart
Read More: Technical Analysis
Traders are equally divided
Market sentiment remains equally divided between the bulls and the bears, while the share of purchase orders inched higher, namely from 49 to 51%.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 61% of all open positions are short and the remaining 39% are long. Meanwhile, sentiment at Saxo Bank worsened over the day, with 53% of traders now being short and the other 47% being long the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
© Dukascopy Bank SABy the end of the next three months traders believe the Cable is to rise above the 1.26 major level, as 55% of survey participants believe so. While the current price is around 1.28, the average forecast for July 19 is 1.2608. The 1.18-1.20, the 1.28-1.30 and the 1.30-1.32 ranges are now the most popular price intervals, all three having 15% of the votes, while on the second place are the 1.20-1.22 and the 1.26-1.28 price ranges, with 13% of poll participants choosing each of them. Furthermore, the 1.34-1.36 interval was selected by 8% of the voters.