- Percentage of commands to buy the Sterling went down from 55% to 45%
- The sentiment edged down a little, as only 48% of all open positions are long
- 18% of traders still see the pair between 1.54 and 1.56 in three months
- Closest support at 1.5475 in face of weekly R1, nearest resistance at 1.5559/72, represented by the weekly R2, Bollinger band and 200-day SMA
- Upcoming events: BoE's Governor Carney speech, Fed's Yellen testimony, US CPI, US Durable Goods Orders
The Sterling had mixed performance against other currencies. The Pound declined 0.69% against the Canadian Dollar and 0.39% against the Aussie, while there was a 0.43% rally versus the New Zealand Dollar.
Kristin Forbes, a former economic adviser to President George W. Bush and now BOE's Monetary Policy Committee member, said that the Bank of England may have to hike interest rates to ensure financial stability if signs of asset bubbles emerge or household debt increases to unhealthy levels. Financial instability is seen as a potential threat stemmed from a prolonged period of record low interest rates, as low rates encourage market players to take riskier bets to get better returns. Nevertheless, Forbes highlighted that currently this was not a cause of concern. Forbes also said that the main reasons behind low inflation are external factors, including the sharp decline in oil and gas prices, decreases in food and other commodity prices, as well as lagged effect of Pound's appreciation. The rate-setter expected those drivers to fade quickly, resulting in a bounce back of inflation.
Mark Carney, BoE Governor, also said low inflation is temporary and will return to the 2% goal within two years. Inflation was 0.3% in January, marking the lowest rate of British consumer inflation since 1988. Carney said that falling prices of oil and food accounted for three-quarters of the current weakness in inflation. However, he stressed that those drivers were "temporary, one-off development". Carney also said that there was a probability that borrowing costs would be higher at the end of the central bank's three-year forecast.
Bank of England's Governor, Mark Carney, promised that the UK would hit the Central Bank's 2% target within two years time, which is sooner than previously forecast. He also mentioned that current period of falling prices was temporary and fundamentally distinct phenomenon from deflation.
Central bank heads speak
Today some high impact data are expected, such as BoE Governor's, Mark Carney, speech, along with Fed's Yellen testimony. These two people have more influence over their countries' currencies than anyone else. Apart from that, on Thursday the US is also to release the Consumer Price Index and Durable Goods Orders.
GBP/USD drops insignificantly
Mark Carney, Bank of England Governor, pre-warned consumers that a negative inflation rate will be temporary and the UK will not experience deflation. "Enjoy it while it lasts" – Mark Carney said last week.
The Cable attempted to slide down on Tuesday. During the trading day the pair reached a low of 1.5403, stopping ahead of the weekly pivot point, where the Pound was expected to find support. Nonetheless, the currency closed the trading day above the monthly R1 level. Today the GBP/USD cross is likely to post yet another rally, and it will possibly settle around the weekly R1. The bullish outlook is strengthened by the technical indicators, but we should be wary of the resistance cluster around 1.5560.
Daily chart
As we look closer on the hourly chart, the pair has been seen rising for the past 10 hours, maintaining its bullish momentum. As mentioned before, the indicators also support the further uptrend movement of the Cable. Furthermore, the nearest resistance remains quite close, at 1.5514, represented by the Daily R2, although the weekly R2 is a stronger one, because it is being backed by the daily R3.
Hourly chart
Sentiment shifted to bears
The sentiment, however, edged down a little, as only 48% of all open positions are long. At the same time the number of orders to acquire the Sterling declined as well, their percentage contracted to 45%.
The sentiment among the SAXO Bank clients has more bears than bulls, being that only 46% of open positions are long. OANDA traders, however, have a bullish outlook with respect to the Cable, as 59% of market participants are to profit from Sterling's appreciation.
Spreads (avg, pip) / Trading volume / Volatility
18% of traders still see 1.54/1.56 in three months
Traders' expectations improved a lot from the previous week, as now 57% of Community members are predicting the pair to retreat.
A proponent of a bullish scenario, Stix, said that "I predict the bullish sentiment, but I see a small pullback and a retest of the high". At the same time, Daytrader21 holds a bearish view on the pair, as he mentioned that after recent low inflation figures there is no chance that the BoE will raise rates soon and in this regard we should expect further downside pressure.