- 54% of all pending orders are to sell the Pound
- 55% of all open positions are long
- Gains could be capped around 1.28
- Significant support rests circa 1.2624
-
Upcoming Events: UK Retail Sales and Core Retail Sales, BoE Monetary Policy Summary, BoE Official Bank Rate, Asset Purchase Facility, US Initial Jobless Claims, US Import Prices, Philadelphia Fed Manufacturing Index, Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production
The number of Britons applying for unemployment benefits dropped more than expected, whereas wage growth slowed unexpectedly in the three-month period to April. The Office for National Statistics reported on Wednesday that the unemployment rate came in at 4.6% for the period between February and April, unchanged from the prior month and in line with forecasts. Meanwhile, the number of claimants fell to 7.3K, following the preceding month's upwardly revised figure of 22.0K and surpassing expectations for a decrease to 12.5K.
Meanwhile, the number of people in work rose 109K in the three-month period to April. Thus, the employment rate climbed to a record high of 74.8%. Apart from that, average hourly earnings grew just 2.1% between February and April, the weakest since February 2016 and following the March quarter's downwardly revised increase of 2.3%, whereas analysts anticipated a rise of 2.4%. A combination of weak wage growth and strong inflation raised concerns over the ability of consumer spending to contribute to economic growth.
Watch More: Dukascopy TV
Thursday is rich on data
Thursday is also rather rich in terms of fundamental data releases, bringing the UK Retail Sales. The 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 Retail Sales, however, exclude fuel and energy in order to capture a more accurate calculation. However, most attention will be on the BoE today. No rate hike from the BoE is expected, thus, the most impact is likely to be from its Monetary Policy Summary, depending on the tone. Later today second-class data is due from the US, such as the Import Price Index, which informs the changes in the prices 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. Further comes the Capacity Utilization Rate. It is the percentage of the US production capacity, which is actually used over short-time period. It is indicative of overall growth and demand in the US economy. A high capacity utilization stimulates inflationary pressures. Then comes the Industrial Production, which shows the volume of production of US industries, such as factories and manufacturing. Up-trend is regarded as inflationary, which may anticipate interest rates to rise. Finally, the Empire State and Philadelphia Manufacturing Indexes. The Empire State one gauges business conditions for New York manufacturers, while the Philly one serves as an indicator of manufacturing sector trends and is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of the ISM Index.
Read More: Fundamental Analysis
GBP/USD orbits monthly S1
Even though the GBP/USD currency pair experienced some volatility on Wednesday, trade still closed with the Cable remaining relatively unchanged. The pair was also unable to stabilise above the monthly S1, which suggests that more downside movement is possible. However, technical studies are unable to fully confirm this scenario. The 1.2624 level, namely the monthly S2, is still likely to be the bottom floor, where demand is expected to be sufficient to either limit the losses or even trigger a rebound. In case the Sterling manages to outperform the Buck, thus, climb above the monthly S1, a potential resistance area would be just above the 1.28 handle, represented by the 200hour SMA and the upper Bollinger band.
Hourly chart
The daily chart somewhat supports the bearish scenario, as there the Cable is seen unable to reclaim the monthly S1 at 1.2758. After several retests the GBP/USD pair was unable to stabilise above that area, thus, a slide down towards the 1.27 area is possible, with the lower Bollinger band being the support. The monthly S2 is the second target in case the Bollinger band fails to hold the losses.Daily chart
Read More: Technical Analysis/
Traders remain neutral
Market sentiment remains somewhat bullish, as 55% of all open positions are still long. At the same time, there are 54% of all pending orders set to sell the British Pound.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 60% of all open positions are short and the remaining 40% are long. Meanwhile, sentiment at Saxo Bank is also bearish, with 61% of traders now being short and the other 39% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
© Dukascopy Bank SATraders believe the Cable is to rise above the 1.28 major level by the end of the next three months, as 54% of survey participants share this belief. While the current price is around 1.27, the average forecast for September 15 is 1.2845. The 1.34-1.36 range is still the most popular price interval, having 20% of the votes, while on the second place is the 1.20-1.22 interval, with 16% of the voters choosing it.