- 65% of all pending orders are to buy the Pound
- 66% of all open positions are long
- Main resistance is at 1.4151
- The nearest support is represented by the Bollinger band, the weekly and the monthly S1s around 1.3990
- 57% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: US Treasure Sec Lew Speech, FOMC Member Dudley Speech, Fed Announcement, UK CPI, UK PPI, UK RPI, UK HPI, US Import Prices, US Federal Budget Balance
The British currency managed to appreciate against all other major currencies on Friday and over the weekend, but struggled to gain value against some of the commodity-based currencies. The Sterling appreciated the most against the US Dollar, edging 0.51% higher, followed by a 0.40% rally versus the Japanese Yen. Other notable gains of 0.29% and 0.28% were registered against the Euro and the Swissie, respectively, while adding the least against the New Zealand Dollar, namely 0.13%. At the same time, the Pound suffered a 0.68% loss against the Canadian Dollar, while declining 0.15% against the third commodity currency – versus the Aussie.
British industrial production unexpectedly dropped in February, suggesting that the sector may drag on growth for a second straight quarter. According to the Office for National Statistics, industrial output declined 0.3% in February from January, when it climbed 0.2%. Output was predicted to climb 0.1%. Based on the current data, output would need to soar 3.1% in March just to come in flat for the three months through March. Manufacturing production also fell in February, dropping 1.1%. It was down 1.8% from a year earlier. The biggest drag came from the manufacture of transport equipment, which declined 2.9%. Weak trade and manufacturing numbers in recent years have raised concerns about the U.K.'s imbalanced economy.
Britain's economy lost steam in the first three months of the year. The National Institute of Economic and Social Research said its estimates of GDP suggested that the UK's economic output increased by 0.3% in the first three months of the year, the weakest rate of growth for the UK economy since the final quarter of 2012. Meanwhile, the EEF, an association of British manufacturing employers, lowered its 2016 UK GDP forecast to 1.9% from 2.1% and scaled back its manufacturing growth expectations to 0.6% from 0.8% for the year.
Relatively quiet Monday
There are no fundamental economic data releases due, but FOMC Member Dudley and Treasury Sec Lew are both scheduled to speak later today. Their speeches might have some impact on the Cable, but the most important event will be the Fed Announcement, where the Fed releases information about monetary policy. This statement contains information about policy decisions, economic conditions, which is important for investors. However, tomorrow attention should be paid to the UK inflation data, such as the CPI. The Consumer Price Index, released by the National Statistics, is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. The second event will be the Import Price Index, released by the US Department of Labor, which informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise. Finally, the Monthly Budget Statement, which is released by the Financial Management Service, and summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD.
GBP/USD attempts to prolong rally
Last Friday the GBP/USD currency pair managed to regain the bullish momentum and retake the 1.41 major level, also erasing Thursday's losses completely. The Cable still has room for a rally towards the 1.43 psychological level today, which is bolstered by a number of other important levels, namely the monthly PP, the weekly R1, the 20 and the 55-day SMAs. Nevertheless, there is another obstacle at 1.4151, represented by the weekly PP, which could also contribute to keeping the pair from appreciating. According to technical indicators, the Sterling is to continue declining versus the Buck, with the nearest support located just under the 1.40 mark.
Daily chart
As was anticipated, the GBP/USD currency pair broke out of the falling wedge to the upside. The Cable is now expected to continue appreciating, with the 200-hour SMA being the only nearest level to attempt to limit the gains. A breach of the 200-hour SMA is likely to lead the Sterling towards 1.4450 dollars.
Hourly chart
Sentiment turns bullish
Market sentiment remains strongly bullish, as 66% of all open positions are long. Meanwhile, 65% of all pending orders are to buy the Pound.
Concerning the sentiment of other market participants, OANDA has a positive outlook towards the Cable, as 63% of their open positions are long and the remaining 37% are short. Meanwhile, the sentiment at Saxo Bank reached a perfect equilibrium, with 50% of all open positions now being long and 50% being short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (57%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The most popular price interval was selected by 19% of the voters, namely the 1.46-1.48 ones, while the second most popular choice implies that the Pound is to cost between 1.38 and 1.40 dollars in three months, chosen by 15% of the surveyed. At the same time, the mean forecast for July 11 is 1.4252.