- The share of sell orders increased from 47 to 51%
- Bears account for 54% of the market,
- The Bollinger band preventing the pair from edging higher at 1.51
- The bottom target is the monthly S2 at 1.4945
- 58% of traders reckon GBP/USD will be at 1.54 or higher in three months
- Upcoming events today: US Labor Market Conditions Index, US Import Prices, FOMC Member Evans Speech
Rather strong readings of the UK Manufacturing Production and Trade Balance were insufficient for the British Pound to post significant gains against other major currencies. The weaker-than-expected Industrial Production weighed on the Sterling's ability to outperform other major peers, with the GBP/NZD inching higher 0.32%, EUR/GBP down 0.27% and GBP/AUD up 0.24%. The US Non-Farm Payrolls pushed the Cable down by 1.02%, while the Sterling remained relatively unchanged against the Loonie, adding 0.01%, and the Swiss Franc, losing only 0.05%.
The UK industrial production declined more than expected in September and the total industrial production was revised down in the third quarter. At the same time, the country's visible trade deficit narrowed beyond forecasts and manufacturing, on the other hand, rose at the fastest pace on month, the Office for National Statistics reported. The British industrial production tumbled 0.2% in the ninth month of the year, while market experts had been expecting a drop of just 0.1%. In August production was up by 0.9%.
As to UK's manufacturing output, it increased above expectations to a seasonally adjusted 0.8% in September from 0.4% in August, whose figure was revised down from 0.5%. Economists had projected the British manufacturing production to climb up by 0.4% in the previous month. Compared to a year ago, manufacturing fell 0.6%. The UK's trade in goods deficit narrowed to 9.351 billion pounds in September from August's 10.8 billion pounds. The figure was not in line with the forecasted drop of 10.6 billion pounds. The visible trade gap with the Member States of the EU expanded to 7.3 billion pounds, whereas that with non-EU Member States fell to 2.1 billion pounds.
A day to take a breath after US Payrolls data
Monday is a rather quiet day in terms of fundamentals events to influence the GBP/USD this week. The only possible event is the US Labor Market Conditions Index, which shows the change in the level of a composite index based on 19 labor market indicators. However, this index usually has little or no impact on the exchange rate, as its indicators were used in previous releases already. Until Tuesday's US Import Prices nothing is likely to influence the USD crosses significantly.
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 at the beginning 2016."
GBP/USD makes efforts to recover from Friday's slump
The Sterling suffered heavy losses against the US Dollar on Friday, amid an extremely better-than-expected Non-Farm Payrolls data. As a result, not only the seven-month support was pierced, but also the Sep low of 1.5106. Technical studies remain bearish today, but due to lack of impetus the Cable might remain unchanged over the day; however, after falling more than 300 pips last week a correction is more likely to take place. Immediate resistance is represented by the Bollinger band at 1.51, while the nearest support leaves enough room for a decline towards 1.4950.
Daily chart
The worries around the Cable were justified and came true, as the pair breached the trend-line and the 23.60% Fibonacci Retracement, reaching a seven-week low of 1.5026. Nonetheless, a correction is on the way and the attitude of traders is supporting that. The GBP/USD's main target now becomes the 23.60% Fibo, a retake of which should ensure the future retest of the down-trend.
Hourly chart
Sentiment still close to neutral
Bears took the upper hand, accounting for 54% of the market, whereas the share of sell orders increased from 47 to 51%.
The distribution between the bulls and bears at OANDA changed dramatically, as 40% of open positions are short and 60% are long. Meanwhile, the proportion of bulls at SAXO Bank increased today, with the gap between short and long positions wider again. Bulls now take up 58% of the market, while bears-the remaining 42%.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.54 in three months
There appears to be no clear view in the market how the Cable is going to perform during the next three months, but 60% of survey participants reckon that GBP/USD will be at 1.54 or higher. Judging by the results of the poll conducted in October, 15% of traders expect the Sterling to cost between 1.50 and 1.52 US dollars in the beginning of February. At the same time, 13% of the estimates are that the UK currency will be worth either somewhere between 1.56 and 1.58, or 1.58 and 1.60 US dollars in three months. The mean forecast for Feb 9 is 1.5504.