- The number of buy orders remains unchanged at 54%
- 56% of all positions are now long
- 19% of traders assume the Sterling will cost between 1.60 and 1.62 dollars in three months
- The nearest resistance is located around 1.5694, the 20-day SMA
- Immediate support, represented by the weekly S1 and monthly PP, lies around 1.5595
- Upcoming events today: UK Construction PMI, US Non-Farm Employment Change, US Unemployment Rate, US Average Hourly Earnings, US Factory Orders, US Jobless Claims
The British Pound experienced mixed performance over Wednesday, as it appreciated against some major peers and declined versus the others. The largest gain of 0.77% was detected against the Swiss Franc, following with lesser gains against the Aussie (0.22%), the Euro (0.18%) and the Loonie (0.16%). However, the Sterling also lost 0.60% versus the US Dollar and 0.15% versus the Kiwi, while remained relatively unchanged against the Yen, losing 0.05%.
British manufacturing activity unexpectedly slowed in June, recording its poorest performance in more than two years amid weak demand from Europe. The UK Manufacturing PMI declined to 51.4 in June, down from 51.9 a month earlier, according to Markit Economics. The reading missed the median forecast for a rise to 52.5. While total new order increased, export order dropped for a third month in a row. The report underscored the economy's reliance on domestic demand as the Greek debt crisis looms over the recovery in the Euro zone. Trade was a drag on growth in the beginning of the year, and Markit said this is likely to continue, coupled with the Pound's strength. Manufacturing is also the sector where wages have been rising at the slowest pace. While the weekly earnings in the services sector grew some 2.9% in the quarter to April, manufacturers saw their pay climbing only 1% during the same period, and 0.7% in the previous quarter.
Meanwhile, the BoE Governor Mark Carney said that the risks to the UK's financial stability from the ongoing Greek crisis have intensified since early this year. Carney also highlighted that the Financial Policy Committee and the whole financial system is well prepared for the worst when it come to the Greek crisis. The FPC will continue to monitor closely developments and "remains alert to the possibility that a deepening of the Greek crisis could prompt a broader reassessment of risk in financial markets".
Paul Bednarczyk, head of research at 4CAST, is optimistic with respect to the world's largest economy over the coming months, saying that "we should be seeing some better US numbers coming through," which will lead the Cable to 1.54. Meanwhile, the analyst considers that "over the next three months Sterling will perform well on a trade-weighted basis," but GBP/USD is still likely to decline to 1.4850. In the longer-term perspective, Bednarczyk is also bearish, setting his 12-month forecast at 1.42, which will be a story of Dollar strength rather than Sterling weakness.
UK Construction PMI and US Non-Farm Employment Change
The UK Construction PMI is forecasted to show signs of further industry expansion. This current data release is the only relevant one from the UK side concerning the Cable today, and it is likely to have a high impact on the exchange rate, boosting the Sterling. However, a number of releases are also due later today, with most of them at 12:30 PM GMT. The most important one will be the US Non-Farm Employment Change, which shows the number of people employed during the previous month, excluding the farming industry. The number of payrolls is expected to decline, but according to the historical data, there is a solid chance of the data turning out to be better-than-expected. Moreover, the Unemployment Rate, which is due at the same time, is likely to fall down, which is a good sign for the Non-Farm Payrolls, that could show improved figures, compared to the forecast. As a result, the Cable is likely to edge lower by the end of the day.Ross Walker, economist at Royal Bank of Scotland Group, suspects that GBP/USD may descend to 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross mentioned that "the main driver in many ways, as well as the main support in recent times, have been the expectations that the Bank of England will raise interest rates at some point next year, probably the beginning 2016."
GBP/USD risks falling to two-week low
The Sterling surprised with its performance for the second day, as it suffered serious losses against the US Dollar. Losses, however, were limited by a strong support cluster around 1.56, but risks of falling even deeper persist. Yesterday's outstanding US fundamentals forced the Cable to decline and might negatively influence the GBP/USD today. Technical studies retain bullish signals, suggesting the pair could rally back towards 1.57, while a slump towards 1.55 is also not out of the question.
Daily chart
In the first half of the day the GBP/USD currency pair suffered serious losses. The pair dropped down to 1.5587, the lowest in two weeks, but inched slightly higher by the end of the day. Although some consolidation lasted, right now the exchange rate started moving down again. Unless the UK fundamental data manages to boost the Sterling above 1.57, we might see a gradual decline later today.
Hourly chart
Bears prevailing over bulls
There are more bulls than bears in the market, as 56% of all positions are long. Meanwhile, the number of buy orders remains unchanged at 54%.
Although slightly weaker, but other market participants have a bearish outlook towards the Cable. The SAXO Group's sentiment slightly improved, but, nonetheless, remains bearish, as 66% of their traders hold short positions. Meanwhile, bears are growing stronger among OANDA's traders, with 56% of them holding short positions.
Spreads (avg, pip) / Trading volume / Volatility
19% of traders assume the Sterling will cost between 1.60 and 1.62 dollars in three months
The survey participants have high expectations concerning the Cable, as the majority of them, namely 70%, assume the Sterling will cost more than 1.54 dollars after three months. Nevertheless, the most popular choice shifted from the 1.50-1.52 price range to the 1.60-1.62 interval, selected by 19% of the voters. The 1.50-1.52 interval still has 18% of participants voting for it. According to the survey conducted between June 02 and July 02, the mean forecast for October 02 is 1.5778.
At the end of the previous week, the Sterling was little changed, as uncertainty over Greece's debt negotiations sapped investor demand for the pair. This week, the Pound is seen to reach level of 1.5745, as majority of poll participants are short on the currency.
Once again we have AgentSmith, a member of the Dukascopy community, sharing his opinion on the Cable. AgentSmith is in the minority of traders, as he believes the Sterling is to outperform the Buck by the end of the week. "Currently price is overbought and could move sideways, but I am expecting the price to close around 1.6000 on this coming Friday, June 26", he said. AgentSmith's main rival for this week is geula4x, another community member, who assumes the Pound is to sustain losses. Geula4x believes that since the Cable opened the week with a big gap down and Greece has not reached an agreement with creditors, risks of Greece leaving the Euro Zone rise. "Therefore, USD bulls seem better positioned to take control this week", he added. Geula4x also believes that 1.5770 is the top price the Sterling might reach this week.