- Percentage of long positions went from 46 to 51%
- Next week we could see GBP/USD probing 1.2880
- Notable demand area at 1.3126/12
- Traders expect no changes in three months
- Upcoming events: US (Core) CPI, Consumer Sentiment
The Bank of England kept its key interest rates unchanged at its September meeting despite the post-Brexit pressure, official data revealed on Thursday. The bank's policymakers voted anonymously to maintain the central bank's benchmark interest rate at its new, historically low, level of 0.25%. Furthermore, they voted 9-0 to leave the Central bank's bond buying program target level at 435 billion pounds as well as to stick to its new plan to buy up to buy 10 billion pounds of high-grade corporate bonds. Nevertheless, the BoE pointed to persistent risks of Britain's economic slowdown. Also, the Central bank revised up its Q3 GDP growth forecast to 0.3% from the previous projection of 0.1% made in August. All figures came in line with analysts' expectations.
Other data released on the same day showed the country's retail sales decreased less than expected despite the Brexit vote. According to the Office for National Statistics, Britain's retail sales dropped 0.2% month-over-month in August, following the preceding month's upwardly revised gain of 1.9% and surpassing the 0.4% fall forecast. On an annual basis, sales volumes rose 6.2% last month, compared to July's 5.4% rise. Excluding fuel, retail sales climbed 5.9% year-over-year in August, posting the largest increase since November 2014.
US prices to grow 0.1%
The BOE raised questions yesterday whether the central bank is going to cut the late even lower during the next meeting, even though the latest data proved not as bad despite the uncertainty caused by 'Brexit'. But starting from Thursday's afternoon, all attention is on the US numbers. Yesterday the readings were mostly negative for the Dollar; however, both inflation and consumer sentiment figures are expected to improve from what we saw a month ago. Price level in the United States is expected to increase 0.1% in August following no change in July. Meanwhile, consumer sentiment, as reported by the University of Michigan, is to come in at 91.0, up from 89.8.
GBP/USD's rallies limited by 1.3320
The Cable saw no change yesterday, finishing the day at the open price after testing both the resistance trendline and weekly S1 that is currently acting as support. Nevertheless, the bias is bearish, as the currency pair has recently broken out of the ascending channel to the downside. Next week we could see GBP/USD probing 1.2880 (August low and monthly S1), but there is also a notable demand area closer to the spot price, namely at 1.3126/12. This support zone is created by the monthly PP and weekly S2.
Daily chart
In the hourly chart the Pound is still trading near the upper bound of the potential falling broadening wedge, a pattern that implies a rally. However, the area between 1.3320 and 1.3260 seems strong and unlikely to give in to buying pressure, which has been lacking recently, and thus we are more interested in strength of support at 1.3060 (August 29 low).
Hourly chart
Traders remain undecided
SWFX sentiment remains unchanged in the sense that the difference between the numbers of bulls and bears is still insignificant—only 2 percentage points. In the meantime, we could note that the percentage of long positions went from 46 to 51%.
The same situation is observed elsewhere. For example, 54% of positions open at OANDA are currently long. This is more than the share of shorts (46%), but not enough for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also neutral, with 53% of traders being long and 47% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be more or less at the same level where it is now. While the current price is 1.3230, the average forecast for December 16 is 1.3220. Interestingly enough, however, the 1.32-1.34 interval is the least popular along with <1.24, having only 6% of the votes each. Most of the votes are concentrated in 1.36-1.38 (15%), 1.28-1.30 (15%) and 1.34-1.36 (14%) intervals.