- Buy orders now take up 59% of the market
- 46% of traders hold long positions today (previously 47%)
- 13% of traders assume the Sterling will cost either between 1.48 and 1.50 or between 1.56 and 1.58 dollars in three months
- The nearest resistance, represented by the weekly R2 and the Bollinger band, is located around 1.58, whereas the monthly R1 acts as the closest support at 1.5712
- Upcoming events: US Empire State Manufacturing Index, US Industrial Production, US Capacity Utilization Rate, US Preliminary Consumer Sentiment
The Sterling experienced mixed performance over the day. Losses of 0.30% and 0.29% were recorded against the Swiss Franc and the Euro, respectively. At the same time, the British Pound appreciated 0.60% versus the Aussie and 0.41% versus the Loonie, following with lesser gains of 0.22% against the Yen and 0.20% against the Greenback. The Pound remained relative unchanged against the Kiwi, adding 0.01%.
UK manufacturing production rose more than expected in March, while industrial output also overshot economists' forecasts. According to the Office for National Statistics, manufacturing production climbed by a seasonally adjusted 0.4% in the reported month, beating expectations for a rise of 0.3% and following an upwardly revised 0.5% gain in the preceding month. Measured on an annualized basis, manufacturing output edged higher 1.1%, topping estimates for a 1.0% gain, after increasing at a rate of 1.2% in February. The report also showed British industrial production rose the most since September as oil and gas extraction soared and manufacturing increased for a second month. Output gained 0.5% in March from the previous month, whereas economists expected no change. In the beginning of the year, industrial output was revised to show a 0.1% increase from a 0.1% decline, though the ONS acknowledged the effect on GDP would be limited. Oil and gas extraction soared 4.9%, the most since February last year. From a year earlier, industrial output climbed 0.7%.
Meanwhile, the NIESR estimated UK gross domestic product rose 0.4% in the three months through April, following the 0.3% increase in the March quarter. NIESR expects that a softening of GDP growth in the first quarter was temporary and the economy should expand by 2.5% for the year as a whole.
Jamie Jemmeson, head of trading at Global Reach Partners, gave his prospects on the effect the elections might have on the British currency: "I think that generally in terms of you looking at Sterling volatility, a Tory Government would be more positive for the Pound." He still mentioned that "Generally, if you look at historically how the Pound has re-answered, it prefers a Tory Government."
US Industrial Production
There is no significant upcoming data concerning the UK economy today, but a number of data releases concerning the US are due later today. Although the Consumer Sentiment is a high-impact event, changes are expected to be so minor, as well as the impact. Industrial Production, on the other hand, is likely to show growth again, which should strengthen the US Dollar and force the Cable down.
Ross Walker, economist at Royal Bank of Scotland Group, shared his view on the short-term forecast for the Cable. He mentioned that GBP/USD has a moderate sell-off and that it could be down to high 1.50 by around the middle of 2015, or even down to 1.40 by the end of the year. Ross also 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 pressured down by supply at 1.58
Yet again the Sterling underperformed, but still managed to edge up against the US Dollar. The resistance cluster just under 1.58 has prevented the Cable from appreciating too much, making it the third consecutive slowdown in growth. As a result, a rebound is imminent, although technical indicators are emitting mixed signals. Through Friday we can expect that Sterling to fall back to 1.57 level, which is supported by the monthly R1, and maybe even towards the weekly R1, close to 1.56.
Daily chart
The Cable managed to rise above the 1.58 psychological level, but was forced to edge back down afterwards. The Sterling almost reached the 2014 Nov 27 high, which turned the tide for the given pair. Since the second half of Thursday, the GBP/USD pair has been undergoing a consolidation, awaiting for the fundamental data today to impact the movement in either direction.
Hourly chart
Bears keep prevailing over bulls
Market sentiment keeps deteriorating, as 46% of traders hold long positions today (previously 47%). The number of buy orders, on the other hand, increased by six percentage points, now taking up 59% of the market.
Bearish market sentiment of SAXO Group traders returned to its Wednesday's level of 72%. Meanwhile, bears among OANDA traders keep gaining numbers, as 56% of positions are short (previously 54%).
Spreads (avg, pip) / Trading volume / Volatility
13% of traders assume the Sterling will cost either between 1.48 and 1.50 or between 1.56 and 1.58 dollars in three months
The mean forecast for August 15 is 1.5234, while the majority of voters, 60%, believe that the British Pound will cost more than 1.50 dollars after a three-month period. Nevertheless, 13% of the survey participants expect the Pound to cost between 1.48 and 1.50 or 1.56 and 1,58 dollars after three months, while the second most popular choice is the divided between five price intervals: 1.42-1.44, 1.52-1.54, 1.54-1.56, 1.58-1.60 and 1.60-1.62, chosen by 10% of the surveyed each.
During May 11-15 time period the Dukascopy Community members assume this currency pair to slump further, since more than 63% of all votes are bearish. As predicted by traders, the GBP/USD may close around the 1.529 level this Friday.
Concerning the bearish outlook towards the Cable, a member of the community, Stix, expects a retest of the daily support area. He also mentioned that the GBP/USD pair is supported by the weekly frame, so it is not likely to suffer significant losses. Geula4x, another community member, assumes the Sterling will appreciated against the US Dollar, as the pair seems very bullish on the daily chart. Geula4x concludes that after testing a support area around 1.51, the Pound moved sharply higher and tested the resistance at 1.55. He anticipates the Cable to test this resistance level again this week and break higher towards 1.56.