- 53% of all pending orders are to buy the Pound
- 51% of all open positions are now long
- Immediate resistance is around 1.2831
- The closest support rests t 1.2762
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Upcoming Events: US Core PCE Price Index, US Personal Spending and Income, UK GfK Consumer Confidence
The US economy expanded at a stronger-than-initially-expected pace in the March quarter; however, an economic slowdown remained on the table in the second quarter. The Commerce Department reported on Friday that Q1 GDP growth came in at a seasonally adjusted annualised pace of 1.2%, compared to an originally reported pace of 0.7%. Meanwhile, analysts expected the economy to expand 0.9% in the reported quarter.
However, that was the worst performance over the past 12 months. Back in the Q4 of 2016, the economy grew 2.1%. Analysts suggested that the Q1 slowdown was mainly driven by the US President Donald Trump's inability to boost economic growth as promised. Even though the Q1 figure was revised up sharply, weak retail sales, business investment, falls in investment inventories and an increase of the goods trade deficit destroyed hopes for a rebound in the Q2. A separate report released by the Commerce Department showed that new orders for US-manufactured durable goods dropped 0.7% last month, whereas orders for core durable goods fell 0.4%.
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Upcoming events: US Core PCE Price Index, Personal Income and Spending
Since there are bank holidays in most countries today, focus turns to Tuesday's fundamentals, such as the US Core PCE Price Index. It is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products, such as food and energy, in order to capture an accurate calculation of the expenditure. It is also a significant indicator of inflation. Another event will be the US Personal Income, which measure the total income received by individuals from all sources, including wages and salaries, interest, dividends, rent, worker's compensation and transfer payments. This figure can provide insight on the US employment situation. Similarly, Personal Spending measures purchases of goods and services by households and by non-profit institutions that serve households from private business.
Read More: Fundamental Analysis
GBP/USD: correction anticipated
The Sterling suffered from the election polls, which showed that Theresa May is barely ahead, thus, resulting in a breach of the strong support cluster around 1.2850. Although a technical correction after such a decline is likely, downside risks remain present as well. The 1.28 psychologic level is what keeps keeping the GBP/USD pair afloat at the moment, with the next strong demand area located only around 1.27, formed by the weekly S1, the 55-day SMA and the 23.60% Fibo. Meanwhile, technical indicators are in favour of the positive outcome, in which case the nearest significant resistance will be the weekly pivot point at 1.2977, but such a strong recovery is unlikely.
Daily chart
As was expected, the exchange rate went down all the way towards the 1.28 major level, breaching it slightly, but ultimately finding support. With the rebound already taken place, the British Pound should erased some of previous week's losses, but it is yet uncertain whether the regained bullish momentum will be able to persist.Hourly chart
Read More: Technical Analysis
Bearish sentiment still prevails
Bulls are now slightly outnumbering the bears, as 51% of all open positions are now long and the remaining 49% are short.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 58% of all open positions are short and the remaining 42% are long. Meanwhile, sentiment at Saxo Bank is also bearish, with 59% of traders now being short and the other 41% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
© Dukascopy Bank SATraders believe the Cable is to rise above the 1.30 major level by the end of the next three months, as 60% of survey participants share this belief. While the current price is around 1.30, the average forecast for August 29 is 1.3049. The 1.34-1.36 range is now the most popular price interval, having 24% of the votes, while on the second place are the 1.20-1.22 interval, with only 14% of the voters choosing it.