- 53% of all orders are still to sell the Sterling
- 56% of all positions are long
- Immediate resistance is represented by the weekly PP at 1.5084
- The Nov low at 1.5026 is the nearest support
- 70% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events today: UK Manufacturing PMI, US ISM Manufacturing PMI, US Markit Manufacturing PMI, US Construction Spending, FOMC Member Evans Speech
The Sterling experienced mixed performance over the last 24 hours, amid some fundamental data failing to beat expectations. Commodity currencies, such as the Aussie and the Kiwi, outperformed the British Pound due to rising oil prices yesterday. The GBP/AUD lost 0.33% and the GBP/NZD fell down 0.60%; however, the third commodity currency, namely the Loonie, lost 0.06% versus the GBP. The Sterling also remained relatively unchanged (0.05%) against the Swiss Franc, while also adding 0.40% against the Euro and 0.38% versus the Yen.
British consumer confidence declined to its lowest level in the last six months in November, a survey conducted by GfK on behalf of the EU revealed. The consumer sentiment indicator fell to +1 in November from +2 in the preceding month, while analysts had expected it to remain unchanged in November. The last time the figure reached such a low level was in May. With regards to Britain's economic growth, it demonstrated weak numbers in the third quarter. The second revision to the UK GDP stayed steady at 0.5%, matching market expectations, the Office for National Statistics reported. In the second quarter, the economy grew by 0.7%. Measured in yearly terms, the GDP climbed up by 2.3%. The government's spending accounted for 1.3% quarter-on-quarter, capital expenditure rose by 1.3% on quarter and the total business investments stepped up by 2.2%, beating economists' projections of 1.5%.
As to the house price growth in the UK, it slowed somewhat in November, according to data collected by Nationwide. More precisely, house prices moved up 3.7% from a year ago down from October's 3.9%. It was the weakest growth since August, when prices increased by 3.2%. On a monthly basis, house prices climbed 0.1% in November compared with a rise of 0.5% in October.
UK Manufacturing PMI and US ISM Manufacturing PMI
The two main events today are the UK and US Manufacturing PMIs. The Manufacturing Purchasing Managers Index (PMI) is released by both the Chartered Institute of Purchasing & Supply and the Markit Economics, it captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in the UK or the US. According to the forecast, the UK's PMI is expected to weaken, while the one from the US to strengthen. If data manages to meet expectations, the Cable is likely to fall. However, a number of secondary fundamental data is due from the US today, which could influence the US Dollar as well.
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 struggles to preserve bullish momentum
A correction occurred on Monday, causing the Cable to erase intraday losses and end the day with a 21-pip gain. The weekly pivot point remains the closest resistance today, but a rather high probability of the GBP/USD falling down again persists. The November low at 1.5026 keeps supporting the pair and could hold the losses. However, technical studies are giving bearish signals in all timeframes, implying that a breach of the immediate support is possible. The second target to limit the losses is around 1.4980, represented by the Bollinger band and the weekly S1.
Daily chart
The GBP/USD rebounded from the 1.50 major level yesterday, retaining sufficient strength to pierce the new possible down-trend, thus, deeming it unviable. The pair has been recovering ever since, now edging closer to the 200-hour SMA at 1.3030, which, in turn, could hold the gains or reverse the rally.
Hourly chart
Bulls now outnumbering the bears
SWFX traders' sentiment remains rather strong, with 56% of all positions long, whereas 53% of all orders are still to sell the Sterling.
OANDA and SAXO Group are different in their outlooks towards the GBP/USD. At OANDA 56% of traders are holding long positions and the remaining 44% - short. Meanwhile, the share of bears at SAXO Group is taking up 55% of the market, up from 53% on Monday.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.54 in three months
The majority of votes shifted to the bearish, as most of the survey participants (70%) believe the GBP/USD is going to cost 1.54 or less US dollars in three months. The most popular price interval is the 1.48-1.50, chosen by almost a quarter (25%) of the voters, while the second choice in popularity was the 1.46-1.48 price range, selected by only 15% of participants. Meanwhile, the mean forecast for Mar 01 is 1.5184.