- 55% of pending orders in the 100-pip range are to sell the pair
- 51% of traders are bearish on the Pound
- Important support lies near 1.3485
- Upcoming events: UK Public Sector Net Borrowing, US Unemployment Claims, US Philly Fed Manufacturing Index
The Sterling strengthened significantly against the US Dollar, as all the main components of the UK retail sales report showed better-than-expected figures for August. After the release, the GBP/USD jumped by 0.67% or 91 base point to touch the daily high of 1.3606 However, by the next couple of hours the pair resumed trading in a weaker area between the 1.3525 and 1.3560 marks.
The Office for National Statistics reported that both Britain's retail sales and core retail sales rose 1.0% in August, beating expectations for a 0.2% rise and ignoring rising prices brought by post-referendum weakness of the Sterling. Therefore, strong figures are likely to boost expectations for the Bank of England's rate hike announcement in November.
US Unemployment Claims
Apart from some minor data releases during this session, two data sets from the United States scheduled for 1230GMT should be taken into account. The Department of Labour is to publish weekly Unemployment Claims, while the Federal Reserve Bank of Philadelphia is to release its Manufacturing Index. However, prior to this, the UK is still to publish Public Sector Net Borrowing at 0830GMT.
GBP/USD fails to pass 1.3485 mark again
In accordance with expectations, a release of much better than expected data on the UK Retail Sales led to a premature breakout from a symmetrical triangle. However, the subsequent Federal Funds Rate announcement dragged the pair in the opposite direction.
For the third day in raw the fall of the rate was stopped at the monthly R2, which is located at the 1.3485 level. Today the currency pair is not expected to make any significant moves, as it is squeezed between two combined barriers that are likely to neutralize any attempts of a breakout.
From the top it is constrained by the 55- and 100-hour SMA, while from the bottom by the above monthly R2 plus the weekly PP at 1.3456. But from a daily perspective, the buck is expected to continue to gradually recover against the Pound.
Hourly chart
The Pound was poised for gains during most of Wednesday's trading session, as apparent from the massive upward shadow pushing as high as the 1.3650 mark. However, the statement of the FOMC at 1800GMT later in the day strengthened the Greenback and consequently pressured the rate down to the 50% Fibonacci retracement line and the monthly R2 circa 1.3500. The same range has been maintained during Thursday morning, thus showing lack of volatility in either direction.
Daily chart
Market sentiment is bearish
The bearish market sentiment has once again taken the upper hand with slight prevalence of 1%, as the number of short positions on Thursday is 51%. Meanwhile, 53% of pending orders are to buy the Pound.
In addition, OANDA traders are still bearish on the pair, as 63% of open positions are short (+3%). Traders at Saxo Bank are likewise increasingly bearish with 71% short positions (+1%).