- 52% of pending orders in the 100-pip range are to SELL
- 60% of traders are bullish on the Pound (+2%)
- Nearest resistance is located circa 1.32
- Upcoming events: UK Average Earnings Index 3m/y, UK Claimant Count Change, UK Unemployment Rate, FOMC Members Dudley and Kaplan to speak, US Building Permits, US Housing Starts
The GBP/USD exchange rate retreated from the peak to start a downward trend after a decent UK economic data. The Sterling weakened against the US Dollar by 12 base points to keep falling to the intraday low and start consolidation nearing the 1.3200 level.
The Office for National Statistics revealed the UK consumer inflation matched growth forecasts with a 3.0% pace in September, as Brexit continued to boost the cost of living in the country. Meanwhile, the strong CPI figure is set to make the Bank of England's interest rate increase virtually certain. In addition, the release showed that the inflation rate was 0.9% above the wage growth pace, suggesting that the squeeze on incomes has become tighter.
Busy day for traders
Wednesday's economic calendar involves fundamental events both from the UK and the US. The British Office for National Statistics is to release the Average Earnings Index, the Claimant Count Change and the Unemployment Rate at 0830GMT. In addition, the US Census Bureau will publish data on Building Permits and Housing Starts for the month of September at 1230GMT.
The President of the Reserve Bank of New York William Dudley and the President of the Reserve Bank of Dallas Robert Kaplan are set to participate in a panel discussion ‘Dallas and New York as Centres of Growth' at 1200GMT.
GBP/USD loses 100 points
Although inflation report matched with forecasts and Gov Carney again admitted possibility of interest rate hike, the Pound lost almost 100 points against the Dollar just in couple of hours. Such keen reaction shows that the main investors' concern is related to success of the Brexit talks.
From technical perspective, the cable passed through the 200-hour SMA and now is facing to other support barriers on its way up until the 38.2% Fibonacci retracement level at 1.3145. In this sense, the pair is expected to continue to slip to the bottom.
However, there is a need to take into account that after such sharp falls traders usually tend to restore lost positions, which means that an area near 1.326 might become a target once again (as long as market sentiment remains predominantly bullish).
Hourly chart
The Pound closing in the red area on Tuesday confirmed that it five-day appreciation apparent last week was solely a correction against the overall down-trend. Thus, the rate might try to approach the lower boundary of the junior ascending channel during October.
If looking at a shorter perspective, the Pound was stranded between the weekly PP at 1.3224 from above and a combined support formed by the 38.2% Fibonacci retracement, the 55-day SMA and the weekly S1 circa 1.3140 early on Wednesday.
In case the rate pushes as low as the latter, it is unlikely that this strong support area is breached in this session.
Daily chart
Bulls become stronger
The bullish SWFX market sentiment has increased by 2 percentage points on Wednesday, thus currently standing at 60%. In addition, 54% of pending orders are to buy the pair (-2%).
OANDA traders have turned slightly bearish on the Pound, as 51% of open positions are short in this session. In addition, Saxo Bank clients are still in favour of a fall, as the number of short positions is 60% (-2%).