- The number of buy orders surged from 54 to 57%
- 65% of all open positions are long
- The main short-term support lies at 1.3645
- Resistance is at 1.3950, namely the weekly S3, the monthly S1 and the Bollinger band
- 59% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Second GDP Estimate, UK Preliminary Business Investment, US Durable and Core Durable Goods Orders, US Jobless Claims, US HPI, US Natural Gas Storage
The Pound continued to slide down yesterday, sustaining notable losses against all other major currencies. Fears of Brexit kept weighing on Sterling crosses, with the largest losses registered against the Loonie (1.33%), the Swiss franc (0.91%) and the Kiwi (0.91%). However, against the third commodity currency, namely the Aussie, the British Pound performed the best, although the GBP/AUD dropped 0.59% lower. Other close to 0.65% declines were also registered against the safe-haven Yen, the European single currency and the Greenback.
Activity in the UK retail sales sector cooled in February for the second month in a row, and retailers' expectations for sales in the coming months eased to the lowest level since 2013. Retail sales declined this month as the overall balance measuring volumes dropped to 10% from 16% in January, compared with economists' forecast for 12%. A measure of expected sales for the month ahead slid to 2% from 10%, hitting the lowest level since May 2013, while the report also revealed retailers expect to scale back investment spending slightly in the foreseeable future. Nevertheless, low inflation, increased consumer confidence and promotions are likely to continue supporting the retail sector and overall household spending. Inflation in Britain remains subdued at 0.3%, and is predicted to climb only at a very slow pace as low commodity prices and cheaper imports put downward pressure on the headline measure.
With intensifying talks over Brexit, analysts are weighing what effect the potential UK's exit from the European Union might have. The high-profile fund manager Neil Woodford said that the long-term economic implications may not be as severe as some have estimated, but regardless of the outcome of the 23 June referendum, the effect would be profound.
UK Second GDP Estimate and the US Core Durable Goods Orders are today's main drivers
The two most important fundamental economic data releases to influence the Cable are the UK Second GDP Estimate and the US Core Durable Goods Orders. The GDP figures are releases by the Office for National Statistics, which measures the change in the inflation-adjusted value of goods and services. The GDP is the primary gauge of the economy's health. However, the current release is the Second GDP Estimate, thus, the impact on the Sterling crosses is to be lower than the Preliminary release. Talking about the US Core Durable Goods Orders, which are released by the US Census Bureau, measure the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, excluding the transport sector. As those durable products often involve large investments they are sensitive to the US economic situation. No significant changes are expected in the GDP figures, but the Core Durable Goods Orders are forecasted to sharply rebound.
GBP/USD poised for more weakness
On Wednesday the Cable suffered a rather serious decline for the third consecutive day this week, also crossing a strong support in face of the weekly S3 and the monthly S1. This cluster is now providing immediate resistance, with the Bollinger band now bolstering it. Although the prospects are bearish towards the GBP/USD, a possibility of the pair undergoing a corrective rally exists. If the Sterling manages to rise above 1.3950 dollars, we are likely to see the 1.40 level retaken. Contrariwise, with more bearish momentum the slump could extend even beyond 1.38.
Daily chart
The British Pound continued to fall against the US Dollar on Wednesday, but appears to have found some support at the 1.39 major level. The pair is now in a period of consolidation between 1.39 and 1.3950, awaiting for a potential market mover to help it regain the bullish momentum or to slump further.
Hourly chart
Three brokers - three sentiments
Bulls keep retreating, as 65% of all open positions are now long (previously 67%). The number of buy orders surged from 54 to 57%.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 59% of them are long, compared to 60% on Wednesday. At the same time, among Saxo Bank traders bulls took over: 56% of their open positions are long and the other 44% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (59%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price interval was selected by 16% of the voters, namely the 1.36-1.38 one, while the second most popular choice implies that the Pound is to cost either between 1.40 and 1.42 dollars or between 1.46 and 1.48 dollars in three months, both chosen by 12% of the surveyed. At the same time, the mean forecast for May 25 is 1.4392.
Dukascopy Community members are almost equally divided on the nearest future development of this currency pair. The median forecast is located slightly below the 1.44 mark for Friday of this week.
On the bullish side of the barricade a member of the Dukascopy Community, Besim76, mentioned that the GBP/USD dipped 0.70% ahead of a Brexit decision to trade at 1.4405. "A deal was reached late on Friday which could keep the UK in the Eurozone," he mentioned, adding that the deal makes clear that internal market will be expanded to include services.
Meanwhile, another trader Pisakjanos has a bearish perspective towards the Cable. "I suppose that rumours about the Brexit will circulate and create chaos," he shared his view concerning this week's possible outcome.