- 55% of pending orders in the 100-pip range are to SELL
- 51% of traders are bearish on the Sterling (-2%)
- Strong resistance circa 1.4150
- Upcoming events: UK Net Lending to Individuals m/m, US CB Consumer Confidence, BOE Governor Carney and US President Trump to speak
The US consumer spending strengthened in December amid higher demand for services and goods, though an increase came at the cost of savings, which fell to the lowest level in 10 years in a worrying sign for future economic growth and consumption.
The report indicated that the PCE Price Index, the Federal Reserve's preferred measure of inflation, increased 0.2% in December after a 0.1% gain. Meanwhile, consumer spending added 0.4% in the reported month from an upwardly revised 0.8% in November.
Day with noteworthy fundamentals
The economic calendar for this session includes several noteworthy fundamentals. In terms of the Pound, the Bank of England is to release its Net Lending to Individuals for December, while the Bank's Governor Mark Carney is due to testify before the House of Lords Economic Affairs Committee at 0930GMT and 1530GMT, respectively.
The US Conference Board Inc is set to publish the Consumer Confidence index at 1500GMT. In addition, the US President Donald Trump is due to deliver a speech titled ‘The State of the Union Address' early on Tuesday at 0200GMT.
GBP/USD tests 200-hour SMA
The British Pound continues to depreciate against the US Dollar for the second consecutive session. This bearish momentum has resulted in a breakout of a four-week ascending channel. At the time of this analysis, the pair was testing the 200-hour SMA located near the 1.4050 mark.
Technical indicators demonstrate that there is still some donwside potential, especially if this long-term moving average is breached. A possible downside target in this case could be the 38.20% Fibo near 1.3950. On the other hand, fundamentals might still push the rate higher within this session, thus pushing the Pound towards the 55– and 100-hour SMAs at 1.4150.
By and large, longer-term perspective demonstrates that bears should prevail during the following trading sessions.
Hourly chart
After reaching a 1,5-year peak of 1.4250 last week, the Sterling is gradually edging lower against the Greenback, setting the upper boundary of a breached long-term channel slightly below 1.40 as a near-term target.
It is expected that the current trading range between the weekly PP and S1 is maintained. The slight tendency downwards together with technical indicators suggests that bears should be the dominant force this week.
Daily chart
The bearish SWFX sentiment has slightly weakened today, as 53% of traders are holding short positions (-2%). Meanwhile, 57% of pending orders are now to sell the Pound (-5%).
The bearish sentiment of OANDA traders has increased today with 63% of open positions being short (+4%). Saxo Bank clients share the same sentiment with 55% short positions (unchanged from Monday).
Spreads (avg, pip) / Trading volume / Volatility