- The number of orders to acquire the Pound in the 100-pip range remains low, as only 45% are set to purchase the Sterling
- The number of bears is increasing, with today's short positions standing at 46%
- 18% of traders still see the pair between 1.54 and 1.56 in three months
- Closest support at 1.5475 in face of weekly R1, nearest resistance at 1.5559/65, represented by the weekly R2 and 200-day SMA
- Upcoming events: US Consumer Price Index, US Durable Goods Orders, US Initial and Continuing Jobless Claims, UK GDP, US GDP
The Sterling performed quite good against most majors. The Pound gained 0.48% versus the US Dollar and 0.39% against the Japanese Yen. However, a 0.38% loss was seen versus the New Zealand Dollar.
The number of mortgages approved by British banks picked up in January following six-month streak of declines, but remained markedly lower compared with the same period last year. According to the British Bankers' Association, mortgage approvals for house purchases increased to 36,394 in the reported month, up from 35,816 in December. Although the gauge rose, it was still down 26% from January 2014. Moreover, BBA reported that improved household finances and increased availability of credit spurred demand for personal loans at the beginning of the year. Personal loans rose 3.9% on an annual basis, the highest rate since 2008. Meanwhile, the latest data from the Bank of England revealed that the number of mortgage approvals had surged to 60,275 in December, up from a revised 58,956 in the preceding month. The volume of credit for house purchases also rose by 1.6 billion pounds, slightly below the six-month average.
The second estimate of UK GDP is due later today. The first estimate showed the British economy grew 0.5% in the December quarter of last year, down from 0.7% in the preceding three-month period. The first estimate was based on around 50% of the data available, and included information only on the output side of GDP. Analysts' expectations for the second estimate of GDP stand for no change to the headline quarterly reading.
Bank of England's Governor, Mark Carney, promised that the UK would hit the Central Bank's 2% target within two years time, which is sooner than previously forecast. He also mentioned that current period of falling prices was temporary and fundamentally distinct phenomenon from deflation.
US CPI likely to slump
Today only important US data will be released. The US CPI and Durable Goods Orders are expected to have high impact on the Greenback, whereas tomorrow, the UK GDP and US GDP releases are likely to edge the Dollar down, as US GDP is expected to drop by 0.5 percentage points.
GBP/USD rallies further
Mark Carney, Bank of England Governor, pre-warned consumers that a negative inflation rate will be temporary and the UK will not experience deflation. "Enjoy it while it lasts" – Mark Carney said.
Sterling's performance exceeded expectations yesterday, as the GBP/USD currency pair edged closer to the weekly R2 level. However, the cross appears to be trading in a rising wedge and is closing in on its peak. Hence, the Pound is likely to cross the lower support trend-line of the pattern, possibly on Friday, as the pair approaches a cluster around 1.560. The market sentiment, which was deteriorating during the week, strengthens this views.
Daily chart
Looking at the pair in a shorter time frame, the pair has been in a rising trend, with minor drawbacks on the way. Right now the pair is traded just above the 20-hour SMA and keeps edging down, but there is a solid chance it is going to be pierced. Whereas, the only strong support lies between the 55-hour SMA and lower Bollinger band.
Hourly chart
More bears in the sentiment
As mentioned above, the number of bears is increasing, with today's short positions standing at 46%. Moreover, the number of orders to acquire the Pound in the 100-pip range also remains low, as only 45% are set to purchase the Sterling.
The sentiment at the SAXO Bank is more bearish than bullish, as 55% of all open positions are short. OANDA traders, on the other hand, prefer to be long the Pound, 55% of positions are long.
Spreads (avg, pip) / Trading volume / Volatility
18% of traders still see 1.54/1.56 in three months
Traders' expectations improved a lot from the previous week, as now 57% of Community members are predicting the pair to retreat.
A proponent of a bullish scenario, Stix, said that "I predict the bullish sentiment, but I see a small pullback and a retest of the high". At the same time, Daytrader21 holds a bearish view on the pair, as he mentioned that after recent low inflation figures there is no chance that the BoE will raise rates soon and in this regard we should expect further downside pressure.