- The share of purchase orders slid from 70 to 54%
- Market sentiment is bullish at 67%
- The main short-term resistance lies around 1.4075
- Support is at 1.3945, namely the weekly S3 and the monthly S1
- 56% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK CBI Realized Sales, US Markit Services PMI, US New Home Sales, USD Crude Oil Inventories, MPC Member Cunliffe Speech
The British currency extended its declines on Tuesday, sustained rather serious losses against non-commodity currencies. This time, the British Pound held stronger against commodity currencies, as the GBP/NZD dropped only 0.05%, the GBP/CAD inched down 0.28% and the GBP/AUD experienced a 0.57% decline. Fuelled by the BoJ Governor's remakrs, the Sterling suffered a rather huge loss of 1.61% against the Japanese Yen, while another significant slump was registered against the Swiss Franc, namely 1.75%. At the same time, mild losses of 0.90% and 0.82% were seen against the US currency and the Euro, respectively.
While speaking in Britain's Parliament, BoE Governor Mark Carney said that the central bank makes no judgement on potential outcome of the UK's referendum on its EU membership, but noted moves in the Sterling since the date of the vote was announced. Carney took an opportunity to highlight that the BoE is not interested, nor intended to introduce negative interest rates.
With traders already pushing back bets on the timing of a Bank of England interest rate increase, the prospects on the UK exiting the European Union, world's largest single market, is fuelling further uncertainty. Even though the timing of the first move remains highly uncertain, the next move will likely be an increase, BoE Deputy Governor Minouche Shafik said. Shafik also noted that once the uncertainty about the internal inflationary pressures dissipate, the interest rate may increase faster than the markets expect at the moment. Shafik reiterated that significantly low inflationary pressures stem primarily from external developments such as cheap oil and the weakening of global demand. With regards to wages and their impact on inflation, Shafik said that if the labour market continues to tighten, she expects "wage growth will ultimately pick up to levels more consistent with inflation being at target.
US Markit Services PMI and New Home Sales
With no significant economic data releases scheduled for today, all attention shifts to the US data, namely the US Markit Services PMI and the US New Home Sales. The Services Purchasing Managers Index (PMI) is released by Markit Economics, which captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in US. Meanwhile, the number of New Home Sales, released by the US Census Bureaum, is an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes so, as a result, the demand for goods, services and the employees is stimulated.
GBP/USD to keep sliding down
The British Pound experienced another sell-off yesterday, exceeding Monday's loss by ten pips. Even though technical studies retain mixed signals in the daily timeframe, the Cable is expected to suffer another decline today, falling under the 1.40 mark. The closest area to limit the dips is represented by the weekly S3 and the monthly S1 at 1.3945. However, this threshold might well fail to keep the GBP/USD currency pair afloat, leaving the door open to a decline towards the 1.39 major level. Meanwhile, the Bollinger band and the weekly S1 form a resistance area around 1.4065.
Daily chart
Although attempts to rebound were seen, the GBP/USD currency pair failed to remain above the January low yesterday. The bearish momentum keeps prevailing and pushing the pair lower. Another attempt to regain the bullish bias is expected to be made, but with no solid support present the outcome looks grim.
Hourly chart
Three brokers - three sentiments
Although not as strong as yesterday, but market sentiment remains bullish at 67%. The share of purchase orders slid from 70 to 54%.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 60% of them are long, compared to 59% on Tuesday. At the same time, among Saxo Bank traders bulls took over: 56% of their open positions are long and the other 44% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (56%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price interval was selected by 15% of the voters, namely the 1.36-1.38 one, while the second most popular choice implies that the Pound is to cost either between 1.40 and 1.42 dollars or between 1.46 and 1.48 dollars in three months, both chosen by 13% of the surveyed. At the same time, the mean forecast for May 24 is 1.4439.
Dukascopy Community members are almost equally divided on the nearest future development of this currency pair. The median forecast is located slightly below the 1.44 mark for Friday of this week.
On the bullish side of the barricade a member of the Dukascopy Community, Besim76, mentioned that the GBP/USD dipped 0.70% ahead of a Brexit decision to trade at 1.4405. "A deal was reached late on Friday which could keep the UK in the Eurozone," he mentioned, adding that the deal makes clear that internal market will be expanded to include services.
Meanwhile, another trader Pisakjanos has a bearish perspective towards the Cable. "I suppose that rumours about the Brexit will circulate and create chaos," he shared his view concerning this week's possible outcome.