- Sell orders take up 68% of the market
- 52% of all open positions are now long
- The nearest resistance is located around 1.4535
- The up-trend and the 55-day SMA form support circa 1.4425
- 51% of traders reckon GBP/USD will be at 1.46 or higher in three months
- Upcoming events: UK Goods Trade Balance, US Wholesale Inventories, US Jobless Claims, US Natural Gas Storage, UK Construction Output, US Preliminary UoM Consumer Sentiment, US Federal Budget Balance
In spite of strong readings of the UK Industrial and Manufacturing Productions yesterday, the Sterling continued to suffer from the upcoming EU referendum concerns. The Pound slumped the most against the Swiss Franc, namely 0.90%, while also sustaining considerable losses versus the Commodity currencies – 0.67% versus the Kiwi, 0.60% against the Loonie and 0.45% against the Aussie. The GBP/JPY also edged significantly lower (0.63%), while the British currency edged down 0.59% against the European single currency, but held the strongest against the US Dollar, but still declining 0.28% against it yesterday.
Manufacturing production in the UK advanced further bolstering optimism about the domestic economy. UK manufacturing as well as industrial production data outperformed major economists' expectations in April being mainly influenced by the weaker cable due to upcoming Britain's EU referendum. According to the latest figures released by the Office of National Statistics, manufacturing production skyrocketed 2.3%, against March's 0.1%, and an expected growth of 0%. Industrial production, in turn, jumped by 2% in April, adding 0.3% from March, and far above the 0% reading expected. On a yearly pace, manufacturing production added 0.8%, showing much better results than a forecasts for a 1.5% decline as well as after a steep 1.9% drop in March. Concerning industrial production, this data demonstrated an increase of 2.0% following a gain of 0.3% in the preceding month and in line with forecasts.
Meanwhile, analysts warned that despite such a positive figures which provided a strong boost to the economy, it was still too early to say whether the industrial sector had totally strengthened. Moreover, following data spurred the pound, which currently is suffering upcoming Brexit poll's results.
UK Goods Trade Balance and US Jobless Claims
There are not many events to influence the Cable today, but one of them is the UK Goods Trade Balance. It is released by the Office for National Statistics and is a balance between exports and imports of goods. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP. If a steady demand in exchange for UK exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the GBP. From the US the Initial Jobless Claims are due, which are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labour market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy.
GBP/USD attempts to maintain trade above 1.46
The British Pound traded in a rather tight range between the 1.45 and the 1.46 major levels on Wednesday, but with the bearish bias prevailing. The closest resistance area is represented by the 20-day SMA, the weekly and the monthly PPs, however, is unlikely to limit the Cable's movements, as it failed to do so previously. The Sterling remains under the risk of falling towards the ascending channel's support line at 1.4430, unless the interim demand in face of the 1.46 psychological level triggers a rally. In this case the 1.46 will still be the main target, but technical indicators are unable to confirm either scenario.
Daily chart
The GBP/USD currency pair appears to be trading on top of the 200-hour SMA since the sudden sharp surge on Tuesday. Even though downside risks are present, the support line above 1.44 is expected to hold, but overall, we should see an eventual rally towards the May high and ultimately, the two-year down-trend above it.
Hourly chart
Bulls and bears remain in balance
Market sentiment weakened over the day, as only 52% of all open positions are now long, compared to 58% on Wednesday.
Compared to Tuesday, there are also slightly less bulls at OANDA - they take up 57% of the positions open with the Canada-based broker. Sentiment at Saxo Bank, however, remains close to neutral, as here the number of bears exceeds the number of bulls by four percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
The majority of traders (51%) believe the British currency is to cost 1.46 or more dollars after a three-month period. The most popular price interval was selected by slightly less than a fifth (15%) of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Sterling is to cost between 1.42 and 1.44 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for Sep 09 is 1.4568.
Dukascopy traders are fully sure about the development of the pair, as the average forecast for June 10 is located slightly below the closing level of last Friday, namely at 1.45. Traders' sentiment, in turn, fully worsened, as now 66.7% of votes is short at the moment.
Retaining a positive outlook towards the Cable this week, nuonrg suggests that "the pair closed below the 1.453 mark, but still on a bullish note." He also mentioned that "we might get a straight push forward. But there are some weakening sings below this level."
Traders are still wary of the ‘Brexit', being that AgentSmith is bearish on the Sterling/Dollar. "The Brexit risk continues to undermine GBP with choppy price action expected to continue until the referendum is held," he commented on his view.