- Percentage of buy commands declined further, from 58 to 45%
- Share of longs in the SWFX market increased from 61 to 65%
- Today's target is 1.4360
- Strong support is at 1.4240/30
- 64% of traders reckon GBP/USD will be at 1.48 or lower in three months
- Upcoming events: UK GDP, US (Core) Durable Goods Orders, Unemployment Claims, Pending Home Sales
The British Pound was among the weakest currencies yesterday, winning 0.23% only against the New Zealand Dollar, which came under strong selling pressure due to an increasing possibility of further rate cuts. In addition to the poor fundamentals the Sterling continues to suffer from 'Brexit' talks. The smallest decline in the value of the UK currency was against the Japanese Yen - 0.60%, while the largest change was against the Australian Dollar - minus 1.11%.
UK house prices climbed at a slower than expected pace in January after a decline in mortgage approvals in the prior month, the mortgage lender Nationwide reported. House price growth slowed to 0.3% on month in January from December's eight-month high of 0.8%. As a result, a year-on-year growth declined to 4.4%. According to the British Bankers' Association, mortgage approvals for house purchase plunged in December to the lowest level in seven months of 43,975. The average price of a property is now 196,829 pounds, slightly down on December. According to the Halifax house price index, prices rose 1.7% between November and December, pushing the annual price change up by 9.5%. At the same time, a less volatile quarterly gauge of price growth showed an advance of 1.6%.
Despite cooling at the beginning of the year, house price growth in the UK remains strong by historical standards. British house prices are expected to continue to rise in 2016 amid lag in construction. According to the National Association of Estate Agents, an average of 374 buyers were registered with each agent, down from 403 in November, but higher than the 360 potential buyers recorded in 2014 and the 302 in December 2005.
UK GDP to grow 0.5%
Today's main event for the Pound is the preliminary GDP change in the previous quarter. According to the estimates, the market expects a 0.5% increase during the last three months of 2015. In addition, volatility of the Cable is likely to benefit from the US side as well. 01:30 pm GMT will be marked by the monthly US durable goods orders release and the weekly report on the unemployment claims. And while the former figure is expected to come out worse than the previous reading, the latter is expected to improve from 293K to 281K.
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 prepares for a lift-off from 1.4230
Yesterday, the Cable completed a pullback after it had breached the accelerated falling trend-line earlier this week. Accordingly, even though the indicators are bearish, there is a good possibility the currency pair will rebound from the new formidable demand area around 1.4230, consisting of the trend-line, 2010 low, and weekly pivot point. The target for the next several days is therefore at 1.44 dollars, where the monthly S2 merges with the weekly R1 and 20-day moving average.
Daily chart
The hourly chart confirms a high possibility of a rally. The exchange rate is forming an ascending triangle, and this implies that demand is building up. Today we may expect a surge from 1.4240 up to 1.4360, and eventually, when we get closer to the apex of the emerging triangle, the second level should be broken to the upside.
Hourly chart
Bulls improve positions
Cheaper Sterling spurred buying, and the share of longs in the SWFX market increased from 61 to 65%. However, the percentage of buy commands declined, from 58 to 45%.
A very similar situation is observed at OANDA, where 67% of open positions are long, even though there were only 58% yesterday. As for SAXO Bank traders, they remain almost equally divided between the bulls and bears, the ratio is 54 to 46.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.50 in three months
The majority of traders (64%) believe the British currency is to cost 1.48 or less dollars after a three-month period. The most popular price interval was selected by slightly less than a quarter (24%) of the voters, namely the 1.42-1.44 one, while the second most popular choice implies the Pound is to cost between 1.48 and 1.50 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for April 27 is 1.4583.
Meanwhile, the sentiment for the Cable changed on the opposite side during past seven days. The median expectation for Friday of this week is placed around the 1.427 level.
Even though traders are close to being equally divided between bulls and bears, FX-Imcap believes the Pound is to end the week in the green zone against the US Dollar. "Last trading days have been completely bearish for the GBP/USD, as concerns over BoE Governor Carney last speech reinforced that a rate hike might not take place, at least until the end of 2nd quarter," he commented. The trader also gave his prospects towards the Cable, adding that "a psychological support might be reached at 1.39 if bears overtake the lead, however, major clusters supported by 30 day SMA at 1.468 and 55 day SMA at 1.4880 suggest that an up-trend will occur in the next trading days."
At the same time, a member of the Dukascopy Community with a negative outlook towards the GBP/USD, assumes that there will be no interest rate change both from the Fed and the BoE. "The pair is running on a downtrend and after a first slightly contra trend move I expect a down trend continuation reaching 1.412 level," Khimitau said.