- The share of purchase orders increased from 43 to 60%
- 58% of all open positions are currently long
- Main resistance is the monthly R1 at 1.4446
- The nearest support are the weekly PP and the 55-day SMA around 1.4335
- 55% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: UK CPI, PPI and RPI, UK Public Sector Net Borrowing, US Flash Manufacturing PMI
The British Pound underwent a corrective decline on Monday, as it depreciated against all other major currencies. The largest losses of 0.71% and 0.74% were registered against the Swiss Franc and the US Dollar, respectively. Other notable decline were seen against the Euro (0.51%), the Yen (0.38%) and against the Aussie (0.33%). The Sterling, however, remained relatively unchanged against the remaining commodity currencies, namely 0.06% versus the Kiwi and 0.01% versus the Loonie.
Sales of previously owned US homes declined more than expected in February after hitting the second highest level since 2007, a sign that demand for housing could be weakening due to increasing prices and low inventory. The National Association of Realtors reported that existing home sales plunged 7.1% in February from the preceding month to an annual rate of 5.08 million units, the lowest level since November. Economists, however, had expected a modest decline of 2.6% to a rate of 5.33 million in the reported month. A strong growth in residential real estate is being undermined by a limited availability of properties that has led to higher offering prices. The median price for a previously owned home soared 4.4% from a year ago to $210,800.
Housing was a strong side of the US economy throughout 2015, contributing more than a quarter of a percentage point to GDP growth over the year. Historically, low interest rates and a sturdy improvement in the job market could lend it support, but prices have increased in many markets amid lack of supply, and construction levels for new homes remain historically low. According to the Commerce Department, housing starts increased 5.2% last month, but home builders continue to report land and labour shortages, resulting in delays in projects' completion.
UK CPI and US Markit Manufacturing PMI
Today the inflation figures are due today, with the most important being the UK 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. Second, the US Manufacturing PMI might also have an impact on the Cable. The Manufacturing Purchasing Managers Index (PMI) is released by the Markit Economics and captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the United States.
GBP/USD retakes 1.44
On Monday the Sterling experienced the expected corrective decline against the Buck and returned below the 1.44 major level. However, according to technical indicators, the Pound is likely to appreciate again and extend its recovery towards the current broadening falling wedge's resistance line. The Cable remains supported by the weekly PP and the 55-day SMA around 1.4335, while the monthly R1 is providing immediate resistance at 1.4446. In case of a breach of the monthly R1, the second target will be the Bollinger band circa 1.4566, but the 1.45 psychological level is to prevent the pair from surging that high.
Daily chart
The hourly chart shows the Cable extending its decline, without the retest of the resistance line. The pair now faces the 200-hour SMA, which should limit the losses and cause a rebound, unless too much impetus causes a break of the given support. In this case, the Sterling might fall all the way don't to 1.4140 and possibly confirm the up-trend.
Hourly chart
Sentiment turns bearish
Market sentiment slightly improved, as 58% of all open positions are currently long (previously 51%). The share of purchase orders also increased, namely from 43 to 60%.
A similar but to a lesser extent attitude is observed at OANDA, where 51% of open positions are long, one percentage points less than yesterday. On the other hand, the gap between SAXO Bank traders is widening, being that 48% of positions are long and 52% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (55%) 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 18% of the voters, namely the 1.34-1.36 one, while the second most popular choice implies that the Pound is to cost between either between 1.46 and 1.48 dollar in three months, three chosen by 12% of the surveyed. At the same time, the mean forecast for June 22 is 1.4257.