- The share of purchase orders inched up from 49 to 53%
- 51% of all open positions are long
- Immediate resistance is around 1.2985
- The closest support rests circa 1.29
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Upcoming events: US Crude Oil Inventories, UK Retail Sales, US Initial Jobless Claims, Philadelphia Fed Manufacturing Index
UK consumer inflation climbed more than expected last month amid the sharp fall in the value of the Pound caused by Britain's decision to leave the European Union. The Office for National Statistics reported on Tuesday that its CPI rose 2.7% on an annual basis in April, following the preceding month's gain of 2.3% and surpassing analysts' expectations for a 2.6% increase. British inflation is set accelerate further due the recent rebound in oil prices and the weak Sterling. In the meantime, core consumer prices advanced 2.4% in April, up from the prior month's 1.8% climb and above forecasts for a 2.2% rise.
Later in the day, the Labour Party pointed to rising inflationary pressures, promising voters to lower oil prices and boost wage growth. Despite the post-Brexit vote pickup in inflation, the Bank of England left its monetary policy and key interest rates unchanged last week, claiming that were no signs of overheating in the economy. April's inflation climb was mainly driven by higher airfares, influenced by the timing of the Easter holiday. However, apparel, car taxes, food prices and the weak Pound also fuelled inflation pressures.
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Uneventful Wednesday
Since there are no important economic events scheduled for today, attention turns to Thursday's fundamentals, such as the UK Retail Sales. They 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. Further events are from the US side, namely the Philadelphia Fed Manufacturing Index. It is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. Served as an indicator of manufacturing sector trends, it is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of the ISM Index. The other event is the Initial Jobless Claims, which are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labour market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy.
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GBP/USD set for another quiet day
Another day ended with the GBP/USD pair remaining relatively flat, with the bullish momentum prevailing only slightly, despite an upbeat UK inflation reading. The Cable is now likely to edge further up, due to the immediate support being stronger than before. The pair is also expected to encounter resistance at 1.30, where the weekly R1, the upper Bollinger band and the consolidation trend's upper border form a tough supply zone. Overall, the British Pound is to remain unchanged again, with a possible close near 1.2950. Meanwhile, technical indicators support the possibility of a rally.
Daily chart
On the hourly chart the GBP/USD currency pair was seen retesting the ascending channel's support line, as the exchange rate was reluctant to remain above the 200-hour SMA. This level is still an obstacle today, with risks of the pair returning under 1.29 still present. A successful close above 1.2930 is likely to cause an eventual retest of the channel's resistance.Hourly chart
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Traders remain neutral
Traders retain a neutral outlook towards the Sterling, being that 51% of all open positions are long and the remaining 49% are short. The share of purchase orders inched up from 49 to 53%.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 60% of all open positions are short and the remaining 40% are long. Meanwhile, sentiment at Saxo Bank worsened again, with 56% of traders now being short and the other 44% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
© Dukascopy Bank SABy the end of the next three months traders believe the Cable is to rise above the 1.30 major level, as 59% of survey participants believe so. While the current price is around 1.29, the average forecast for August 17 is 1.3067. The 1.32-1.34 range is now the most popular price interval, having 17% of the votes, while second comes the 1.34-1.36 interval with 15% of the voters, and the third place is tied by the 1.30-1.32 interval, with 13% of poll participants choosing this option.