- 61% of pending orders in the 100-pip range are to sell the pair
- Market sentiment is at equilibrium on Friday
- Important resistance lies near 1.3425
- Upcoming events: US Core Retail Sales m/m, US Retail Sales m/m, Empire State Manufacturing Index, US Capacity Utilisation Rate, US Industrial Production m/m, US Preliminary UoM Consumer Sentiment
The Sterling managed to offset all Wednesday's losses after the Bank of England announced its decision to leave interest rates unchanged. Following the report, the GDP/USD jumped 118 base points or 0.89% to reach the yearly high and continue consolidation in the 1.3394 area given additional boost from the BoE governor's comments.
Apart from keeping the key interest rate at 0.25%, the Bank of England warned about higher possibility of changing rates policy in coming months for the first time in ten years. The main concerns remained surrounding weaker wage growth, slower overall expansion and uncertainty about Brexit impact on the UK economy. Though, the Central Bank expected the yearly growth to pick up more than estimated.
US data releases
The most significant data sets scheduled for this session come from the United States. The day will start with (Core) Retail Sales for the month of August at 1230GMT. The Federal Reserve Bank of New York is to publish the Empire State Manufacturing Index at the same time. Meanwhile, some additional data of mediate importance, namely the Capacity Utilization Rate, the Industrial Production for August and preliminary Consumer Sentiment by the University of Michigan, is released at 1315GMT and 1400GMT.
GBP/USD surges 124 pips amid BoE decision
A decision of the BoE not to change the Official Bank Rate was expected to lead to sharp depreciation of the Pound. This assumption was based not only on historical market reaction on similar fundamental event but also technical analysis. Namely, on a daily chart prior to release the currency pair hit the upper edge of a long-term rising wedge and, in essence, had to make a rebound. Contrary to expectations, bulls pushed the pair in the opposite direction. As a result, the Pound has appreciated against the Greenback by 1.40% just in couple of hours, in the process leaving the dominant formation. Now the pair faces only two barriers on its way, i.e. the weekly and monthly R2 at 1.3425 and 1.3485. Thus, a short-term rebound might follow. But, generally, the pair is expected to continue to move to the top.
Hourly chart
The Pound surged 188 pips against the US Dollar on Thursday, driven entirely by the Bank of England's announcement mid-session. The British currency continues its appreciation in this session, as well, but with reduced strength. The pair reached the weekly R2 on Friday morning, thus demonstrating further upside potential until the monthly R2 and the 50% Fibonacci retracement circa 1.3500. In addition, it managed to breach the upper channel boundary of a long-term ascending wedge. In case the rate reverses, this line will need an adjustment.
Daily chart
Market sentiment more bearish
SWFX market sentiment has diminished and reached equilibrium on Friday, as the number of long and short positions is the same – 50% (-3%). Meanwhile, 57% of pending orders are still to buy the Pound.
On the other hand, OANDA traders are increasingly bearish on the pair, as 64% of open positions are short (+6%). Traders at Saxo Bank are likewise bearish with 69% short positions (+3%).