- Pending orders are equally divided between the buy and the sell ones
- Bears are now in the majority (52%)
- Immediate support is represented by 20-day SMA around 1.5132
- The monthly PP and the 23.60% Fibo at 1.5185 are the nearest resistance
- 69% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events: UK Trade Balance, MPC Official Bank Rate Votes, UK Asset Purchase Facility, UK Monetary Policy Meeting, US Jobless Claims, US Import Prices, US Federal Budget Balance
The Sterling appreciated against most major peers on Wednesday, with exception against the Euro and the Yen. The Pound gained the most versus the US Dollar (1.15%), the Loonie (1.11%) and the Aussie (0.95%), whereas losses of only 0.08% and 0.06% were registered against the Yen and the Euro, respectively. The British currency also remained relatively unchanged against the Kiwi, adding 0.04%.
UK manufacturing production declined unexpectedly in October, signalling a weak start for the industry in the final quarter of the year. Output of British factories dropped 0.4% on the month in October, following a 0.9% increase in September, the Office for National Statistics reported. The biggest contributor to the decrease appeared to be other manufacturing and repair sub-sectors, within which the drop in repair and maintenance of aircraft and spacecraft was the largest downward drag, plummeting 21.5% on a monthly basis. In annual terms, manufacturing output was 0.1% lower compared with October 2014. Overall industrial production climbed as expected 0.1% in the reported month. Nevertheless, industrial output is still almost 9% below its pre-downturn peak in early 2008. Manufacturing output is around 6.1% below its peak.
Markit's headline PMI measure of business activity in UK factories declined in November to 52.7 from a 16-month high of 55.2 in October, as output and new orders rose at a slower pace. Yet, the overall activity so far in the final quarter of the year remained stronger compared with the preceding three-month period. Markit's report also showed little change in the employment level in UK factories following robust job creation in October.
BoE Meeting Minutes is the main driver, data releases shift to the second place
The Office for National Statistics is to release the UK's Budget Statement today (no improvements are forecasted), but the most important even is the BoE's Meeting Minutes and the interest rate decision. Although no changes are expected, markets are still likely to react and most likely push the British currency lower. Later today the Department of the Treasury is to release the US Budget Balance data, where the gap between the income and spending is expected to narrow significantly. The US Jobless Claims are expected to remain and a relatively low level, whereas the change in the price of imported goods and services is forecasted to show deteriorated figures.
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 muted ahead of BoE meeting
The US currency experienced an unexpectedly sharp sell-off on Wednesday, leading the Cable to a fresh two-week high. The two immediate resistances were broken, but the third one, namely the monthly PP and 23.60% Fibo, was able to cap the gains. The Sterling still has room to advance to the 1.53 major level, a break of which would imply the end of the falling wedge pattern, but the 23.60% Fibo is expected to cause a correction today. As a result, the Pound is likely to pierce through the closest support in face of the 20-day SMA and touch the psychological area of 1.51.
Daily chart
As the Cable experienced a rally yesterday, the resistance in face of the possible trend-line and 200-hour SMA proved to be unviable. The 23.60% Fibo, however, managed to hold the losses and is likely to cause a reversal of yesterday's unusual bullish trend.
Hourly chart
Market sentiment now bearish
Bears are now in the majority (52%), while pending orders in the 100-pip range are equally divided between the buy and the sell ones.
OANDA and SAXO Group now have a similar, yet different 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 62% of the market, up from 51% on Wednesday.
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 (69%) 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 slightly more than a fifth (21%) of the voters, while the second choice in popularity is divided between two intervals. The first interval is the 1.46-1.48, whereas the second one implies that the Sterling will cost less than 1.44 dollars in three months, both of which were chosen by 14% of survey participants. Meanwhile, the mean forecast for Mar 10 is 1.5116.
Most of the Dukascopy Community members this week have a negative outlook towards the GBP/USD currency pair, being that 39% of them are long the Sterling and the remaining 61% are short.
Babanu, a trader of the Dukascopy Community, believes that the Pound could outperform the US Dollar by week's end. "I suppose the Pound may found support at weekly pivot, but overall the pair looks ready challenge the weekly resistance at 1.5210 level," babanu commented.
Another trader, shanziester, said that the Cable usually follows the trend of the EUR/USD. "You can see it has moved in the same direction. The pair is highly overvalued now and we can definitely expect a major pullback on Friday," he added.