- The share of orders to acquire the Sterling slid from 56 to 54%
- 70% of all open positions is currently long
- Main resistances are the monthly PP, the weekly S1 and the 20-day SMA around 1.4175
- The nearest support are the weekly S2 and the Bollinger band around 1.3880
- 59% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: UK Retail Sales, US Durable and Core Durable Goods Orders, US Jobless Claims, US Markit Services PMI
The Sterling's performance was poor for another day, however, it still managed to appreciate against commodity-based currencies yesterday. The largest gains of 0.54% and 0.53% were detected against the Aussie and the Loonie, respectively, whereas against the Kiwi only a 0.10% rally was seen. The main reason, of course, was a decline in commodity prices. Meanwhile, the British currency lost 0.65% against the Yen and 0.64% against the US Dollar, followed by less losses of 0.38% versus the Swissie and 0.32% against the European single currency.
British inflation climbed less than expected last month, extending the period the cost of living in the UK has been below the Bank of England's 2% target to 26 months. Prices rose 0.3% from a year earlier, according to the Office for National Statistics. Economists, however, had expected a 0.4% gain in February. Inflation has not been above 0.3% since December 2014 and last hit the central bank's target in December 2013. Most analysts expect inflation to stay around the mark for most of the spring, before gradually moving towards the end of the year to about 1%. The Office for Budget Responsibility now predicts the consumer price index to climb to 0.7% at year-end, compared with 1% estimated earlier. The OBR then predicts inflation to edge higher to an average of 1.6% in 2017. Meanwhile, core inflation, which excludes volatile food and fuel costs, came in line with expectations at 1.2%.
A separate report showed UK public sector net borrowing excluding banks rose to 7.1 billion pounds in February, more than expected. Overall in the fiscal year from April through February net borrowing dropped to 70.7 billion pounds. The OBR predicts net borrowing this year to come in at 72.2 billion pounds, slightly less than estimated in November.
UK Retail Sales and US Durable and Core Durable Goods Orders
Both from the UK and the US economic data releases are scheduled for Today. From the UK the Retail Sales figures are due at 9:30 AM GMT. The retail Sales, released by the National Statistics, measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Secondly, from the US the Durable and Core Durable Goods Orders are to be released. The Durable Goods Orders, released by the US Census Bureau, measures the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments they are sensitive to the US economic situation. The Core Durable Goods Orders, however, exclude the transport sector. Rather poor figures are forecasted in all releases, so the effect on the GBP/USD might be mild.
GBP/USD: downside risks higher
‘Brexit' fears continued to weigh on the British Pound, even causing it to plunge under the monthly PP yesterday. With the breach of this key support level, the GBP/USD currency pair is now poised for more weakness. The exchange rate is likely to extend its decline until the broadening falling wedge's lower border is reached around 1.3650. The closest demand area today is located only around 1.3880; even though it lies out of reach, a slump beyond the 1.40 mark is possible. However, we should not rule out the probability of the bullish momentum returning, as technical indicators retain mixed signals.
Daily chart
The GBP/USD pair slumped for another day, failing to find support at a possible trend-line around 1.4150. This opens the door for a sharper decline towards the 1.36 level, where the support line of a pattern of a larger scale is located.
Hourly chart
Sentiment turns bearish
A relatively high portion of all open positions is currently long, namely 70%, compared to 63% on Wednesday. Meanwhile, the share of orders to acquire the Sterling slid from 56 to 54%.
A similar but to a lesser extent attitude is observed at OANDA, where 57% of open positions are long, two percentage points more than yesterday. Meanwhile, the sentiment at Saxo Bank not only remains bullish, but keeps improving, being that 60% of all open positions are now long and the remaining 40% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (59%) 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 1.38 and 1.40 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for June 24 is 1.4229.
Community members do not expect any surprises from the currency pair this week, as according to the Dukascopy survey the Sterling might end the week at 1.43, slightly changed from the last week's close price. The majority of those polled (62%) share a bearish outlook for the British currency.
According to nuonrg, a member of the Dukascopy Community, the GBP/USD has the same story as the EUR/USD. "The pair showed much strength during the last week. The downtrend seems to be broken for now while momentum is shifted and needs to be confirmed," he commented.
However, RacerX believes that the Pound could edge lower against the US currency, as "with the possibility of a Brexit still looming on the horizon uncertainty about GBP may cause the market to favor the bearish potential." He also added that "the recent lackluster numbers in addition to the FOMC announcement still point toward positive developments in the US economy."