- 62% of all pending orders are to sell the Pound
- 52% of all open positions are long
- Gains should be capped around 1.2880
- Significant support rests circa 1.2630
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Upcoming Events: BoE Governor Carney's Speech, US Current Account, UK Public Sector Net Borrowing, US Existing Home Sales, US Crude Oil Inventories
US homebuilding activity rose slowed unexpectedly last month, official figures revealed on Friday. The Commerce Department reported that housing starts fell 5.5% to a seasonally adjusted annual pace of 1.09M units, the lowest since September 2016, following the preceding month's downwardly revised pace of 1.16M and falling behind analysts' expectations for decline to 1.23M-unit pace. On an annual basis, homebuilding dropped 2.4%. Single-family homebuilding fell 3.9% to a 194K-unit pace in May, the lowest in eight months, after hitting its almost 10-year high in February. The volatile-family housing sector posted a drop of 9.7% to a 298K-unit pace last month.
In the meantime, building permits plunged 4.9% to a pace of 1.17M units during the reported month, compared to the prior month's pace of 1.23M units, whereas analysts anticipated an increase to a 1.25M-unit pace. Despite weak data on homebuilding, analysts suggested that employment would boost home construction in the upcoming months, taking into account the jobless rate at a record low of 4.3% and strong job creation.
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Carney's Speech is the only relevant event today
Tuesday brings the BoE Governor's Speech. As head of the central bank, his words have the most impact on the Sterling's exchange rate than any other person. One US data release is also scheduled for that day, namely the Current Account. It is a net flow of current transactions, including goods, services and interest payments into and out of the US. A current account surplus indicates that the flow of capital into the US exceeds the capital reduction. Wednesday does not bring a lot of data either, but traders could focus on the US Existing Home Sales, as those provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD.
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GBP/USD approaches critical point
Monday did not favour the Pound, as the Cable once again fell under the monthly S1. However, support was found near 1.2725, namely the ascending channel's support line. The Sterling risks breaking this trend-line if supply at the monthly S1 is strong enough for such an occurrence. Technical indicators support the possibility of the negative outcome today, but the British currency could still receive a boost and outperform the Greenback. Consequently, the GBP/USD pair would then be able to finally stabilise above the tough resistance cluster, which rests circa 1.2770. In turn, a close above this zone is likely to allow the Cable to continue recovering until all post-parliamentary election losses are erased.
Hourly chart
On the daily chart the GBP/USD pair is seen caged between 1.2624 and 1.2820, with the exchange rate gravitating towards the monthly S1 at 1.2758 all the time. Any downside developments are likely to be limited by the monthly S2 at 1.2624, while excessive bullish developments are to be limited by the monthly PP at 1.2903. Ultimately, the Cable keeps struggling to surge above the monthly S1, thus another slide down is possible.Daily chart
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Traders remain neutral
Market sentiment turned neutral today, as 52% of all open positions are long. At the same time, there are 62% 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 51% of survey participants share this belief. While the current price is around 1.2750, the average forecast for September 20 is 1.2816. The 1.24-1.26 range is now the most popular price interval, having 18% of the votes, while on the second place are the 1.20-1.22 and the 1.34-1.36 intervals, with 16% of the voters choosing each of them.