- Sell orders are outnumbering the buy ones by only 2% points
- Traders' sentiment remains bullish at 64%
- Immediate support is represented by the down-trend at 1.4889
- The weekly PP around 1.4998 is the nearest resistance
- 65% of traders reckon GBP/USD will be at 1.54 or lower in three months
- Upcoming events: UK Public Sector Net Borrowing, US Final GDP, US Existing Home Sales
The British currency declined against most major peers on Friday and over the weekend, with exception versus the Loonie, adding 0.11% against it. The sharpest loss was registered against the Japanese Yen, which in turn was boosted by the BoJ statement early on Friday. Another significant loss was recorded against the Aussie, namely 0.72%, while mild ones were detected against the Euro, the Kiwi and the Swiss Franc. At the same time, the Cable remained relatively unchanged, edging down 0.04%.
British unemployment fell to pre-crisis levels in the three months through October, whereas pay growth continued to slow, bolstering the Bank of England's intention to keep interest rates ultralow. The number of people out of work dropped by 110,000 to 1.71 million between August and October. There were 31.3 million people in work, 505,000 more than a year ago. Consequently, the unemployment rate dropped to 5.2% in the quarter to October, the lowest level in nearly 10 years, whereas economists had expected the jobless rate to stay unchanged at 5.3%.
However, wage growth disappointed, and a sharp drop in earnings over the reported period indicated that interest rates would remain at a record low of 0.5% for longer. Total pay growth climbed by just 2.4% in the three months to October, down from 3% in the three months to September. Bank of England Governor Mark Carney said he would like to see earnings growth above 3% a year before he would increase interest rates. Even though wages have been rising slowly from their post-crisis lows, earnings growth has remained notably below the pre-downturn levels. While regular earnings increased on average by 4% before the economic slowdown, between 2001 and 2008, the same measure of pay climbed just 1.5% on average between January 2009 and September 2015.
A quiet day on the market, it seems
With no important events to influence the GBP/USD pair today, attention should be paid to the economic data releases on Tuesday. From the UK side the Public Sector Net Borrowing is due. It is the difference between spending and income for public corporations, the central and local governments. According to the forecast, the Borrowing is likely to increase, showing a higher deficit. From the US side the Final GDP or the Annualized GDP is due. The Gross Domestic Product Annualized is released by the US Bureau of Economic Analysis and shows the monetary value of all the goods, services and structures produced within a country in a given period of time. GDP Annualized is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. No changes in the GDP are expected, compared to the previous value.
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 retests down-trend
Even though the Cable failed to rebound on Friday, losses were still limited by the pattern's support line. The pair opened above the 1.49 major level again and should experienced a correction after experiencing a whole week of losses. The immediate resistance is now represented by the weekly PP at 1.4998, but Friday's situation could also repeat itself, causing the GBP/USD to drop to 1.4889, namely the down-trend. The pattern's lower border is bolstered by the Bollinger band and monthly S1, which are to contribute to the pattern's preservation.
Daily chart
The GBP/USD kept trade mostly above the Dec low after having it pierced last Thursday. The pair remains supported by the down-trend under 1.49, while a possible now resistance line could limit the upside potential, as it also coincides with the weekly PP on the daily chart.
Hourly chart
Bulls keep growing stronger
Traders' sentiment remains bullish at 64% (previously 65%), whereas sell orders are outnumber the buy ones by only 2% points.
SAXO Group and OANDA now have different perspectives towards the GBP/USD. Among SAXO Group traders the majority still believes the US Dollar is to outperform the Sterling, as 55% of their positions are short (previously 52%). Meanwhile, 64% of OANDA traders have a positive outlook towards the Cable, compared to 63% on Friday.
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 (65%) believe the GBP/USD is going to cost 1.54 or less US dollars in three months. According to the survey, the most popular choice was the one implying that the Sterling will cost somewhere between 1.42 and 1.44 dollars in three months, selected by 19% of the voters. Meanwhile, the second most popular choice was the 1.46-1.48 interval, voted for by 16% of the surveyed. At the same time, the mean forecast for Mar 21 is 1.5077.