- 56% of all pending orders are to buy the Pound
- 63% of all open positions are long
- Possible upside limit rests at 1.2930
- Significant support rests circa 1.2880
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Upcoming Events: BOE Credit Conditions Survey, US PPI m/m, US Unemployment Claims, Fed Chair Yellen Testifies, FOMC Members Evans and Brainard Speak
The unemployment rate in Britain declined unexpectedly, while the jobless claimant count was little changed, thus missing analysts' expectations. Official report by the Office for National Statistics showed on Wednesday that claims for unemployment aid rose just 6K in May, following the prior month's upwardly revised 7.5K. Economists, however, anticipated a 10K gain. The UK unemployment rate declined to 4.5% in May, reaching its lowest level since 1975.
Meanwhile, the ONS stated that the Average Earnings Index remained flat at 1.8% year-over-year in May, matching market forecasts and following previous month's 2.1% rise. Excluding bonuses, earnings advanced more than expected to 2% in the March-May period, up from 1.7% registered in April. However, real earnings dropped 0.5%, as consumer prices rose at a faster pace than Britons' pay. Inflation was at 2.9% in the reported month, showing the fastest pace of growth in about four years. Experts suggest that the Brexit impact on the economy is set to be even more explicit in the upcoming years.
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Busy day for USD traders
This trading session will start with a report from the Bank of England on secured and unsecured lending at 0830GMT. Subsequently, mid-session will be busy, as the United States is to release monthly PPI, Core PPI and unemployment claims at 1230GMT. In addition, Fed Chair Yellen is to testify on the Semiannual Monetary Policy Report at 1400GMT.
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GBP/USD tests channel
On Wednesday morning, GBP/USD plunged and subsequently surged in response to fundamentals. It was pushed through the 55-hour SMA and the monthly PP circa 1.2880. The 100-hour SMA managed to halt the pair for some hours; however, this level was likewise conquered in the evening. The Sterling surged once again on Thursday morning, pushing through the 200-hour SMA and the weekly PP and thus breaching the channel. Technical indicators remain bullish; however, oscillators signal that the pair may soon be overbought, thus pressuring traders to sell the Pound. Thus, it is expected that the rate fails to sustain the current upward momentum and returns in the 1.2900/20 area by Friday morning.
Hourly chart
Contrary to expectations, the GBP/USD currency pair lost its bearish momentum mid-Wednesday and closed slightly above the 55-day SMA and the monthly PP circa 1.2880. It continues to surge in this session, having reached as high as 1.2950. This upward momentum is likely to allay, but nevertheless remain above the previously-mentioned cluster.Daily chart
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Bearish sentiment prevails
Market sentiment remains bullish on Thursday, as 63% of open positions are long (60% on Wednesday). In addition, 56% of set up orders are to buy the Pound.
On the contrary, traders at Saxo Bank are bearish on the pair, with 63% of traders holding short positions. Moreover, 55% of OANDA clients hold short positions.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound falling
© Dukascopy Bank SAThe majority of traders believe that the Cable should fall below the 1.28 mark three months from now, as 60% (+1%) of survey participants share this belief. The current spot price is around 1.2940, while the average forecast for October 13 is 1.2833 (1.2816 on Wednesday). The 1.24-1.26 range remains the most popular price interval, having 33% of the votes (+1%).