- The number of sell orders added 4% points up to 55%
- Bullish traders' sentiment returned to its Tuesday's level of 54%
- The main short-term resistance lies around 1.4675
- Support is at 1.4467, namely the weekly PP
- 54% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: US Jobless Claims, Fed Chair Yellen's Testimony, UK Construction Output, US Retail and Core Retail Sales, US Import Prices, US Preliminary UoM Consumer Sentiment
Despite rather weak UK Manufacturing Production data, the British currency suffered losses only against two other major currencies, namely the Kiwi and the Yen. The Sterling dropped 1.18% against the Japanese currency, due to return of risk-off sentiment, which boosted demand for safe-haven assets. The other decline of 0.42% was seen against the Kiwi, while the Pound remained almost completely unchanged against other commodity currency, the Aussie, adding 0.01%. The GBP/CAD was the best Sterling cross performer, as it edged 0.77% higher. Versus the remaining major peers, the GBP posted from 0.35% to 0.43% gains.
Britain's industrial production dropped more than expected in the fourth quarter as the manufacturing sector continued to drag down the UK's economy. Total production output declined 0.5% in the December quarter, compared with the three month-period ended September. Industrial production plunged 1.1% on month in December as warm winter weather forced a steep decrease in energy output and the low oil price hurt North Sea oil producers. It was pulled down by a 4% plunge in mining and quarrying sector. Manufacturing production, which accounts for around 10% of GDP, contracted 1.7% in 2015 compared with the previous year, remaining 6.5% below the total it reached before the 2008 crisis. Measured on a monthly basis, manufacturing output declined 0.2% in December, compared with analysts' expectations for a 0.1% gain. According to the Office for National Statistics, total production for the whole of 2015 was 1% higher than in the preceding year.
Weak economic data have consistently urged investors to push back the date when they expect the Bank of England to begin hiking interest rates. Market derivative instruments now price in a lift as late as mid-2019. According to the preliminary data of UK gross domestic product, released in January, the UK economy grew 0.5% between October and December, faster than the third quarter's 0.4% rate of growth.
Fed Yellen's Testimony
Thursday is rather quiet in terms of fundamental events from the UK side, but from the US the Jobless Claims figures are due. Although the number of people applying for unemployment benefits is expected to increase, this particular event tends to have a mild reaction on the market prices. The most important event is Yellen's testimony: round 2. Today she is to testify before the Senate Banking Committee.
GBP/USD to keep edging higher
Even though the GBP/USD currency pair appreciated on Wednesday, it was unable to retain its position near intraday highs. Today the closest short-term resistance is represented by the Bollinger band, the 55-day SMA, the weekly and monthly R1s around 1.4675, but a surge of at least 110 pips in order to reach that area is doubtful. The bullish momentum, however, is expected to prevail, with the Cable remaining under the 1.46 mark. Furthermore, technical indicators keep giving bullish signals, suggesting a retreat towards the immediate support in face of the weekly PP is unlikely.
Daily chart
The Cable mainly remained above the 200-hour SMA this week. Current volatility beyond the 1.4450 level could still be erased and result in the GBP/USD ending the day in the green zone. Furthermore, the up-trend at 1.43 remains intact, implying a decline is unlikely to last.
Hourly chart
Three brokers - three sentiments
Bullish traders' sentiment returned to its Tuesday's level of 54%, whereas the number of sell orders added 4% points up to 55%.
The clients of the other two brokers seem to have different opinions on GBP/USD. OANDA traders are bullish on the UK currency. Right now, 63% of them are long (64% on Wednesday). At the same time, Saxo Bank traders are net short the currency pair: 59% of open positions are short and 41% are long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.50 in three months
The majority of traders (54%) 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 14% of the voters, namely the 1.48-1.50 one, while the second most popular choice implies the Pound is to cost either between 1.46 and 1.48 dollars or between 1.40 and 1.42 dollars in three months, both chosen by 11% of the surveyed. At the same time, the mean forecast for May 11 is 1.4455.
Two thirds of traders who participated in our Dukascopy weekly quiz estimate GBP/USD to go up, while the average forecast stands above 1.46.
Among the two thirds of traders who have a bullish outlook towards the Cable, mutsi believes the "GBP marked a reversal and intraday trend is negative in the growing consolidation phase to test 1.4480." He believes that "support should provide the basis for a new growth to 1.4790."
However, on the bearish side jhinopena suggests that "the pair will start trading within the range mentioned [1.409-1.47]." In his opinion, since it is currently in the upper side of the range, it will go to test the lower boundary.