- 53% of all pending orders are to buy the Pound
- 54% of all open positions are long
- Gains could be capped around 1.2880
- Significant support rests circa 1.2750
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Upcoming Events: BoE Governor Carney's Speech, US Current Account, UK Public Sector Net Borrowing, US Existing Home Sales, US Crude Oil Inventories
US homebuilding activity rose slowed unexpectedly last month, official figures revealed on Friday. The Commerce Department reported that housing starts fell 5.5% to a seasonally adjusted annual pace of 1.09M units, the lowest since September 2016, following the preceding month's downwardly revised pace of 1.16M and falling behind analysts' expectations for decline to 1.23M-unit pace. On an annual basis, homebuilding dropped 2.4%. Single-family homebuilding fell 3.9% to a 194K-unit pace in May, the lowest in eight months, after hitting its almost 10-year high in February. The volatile-family housing sector posted a drop of 9.7% to a 298K-unit pace last month.
In the meantime, building permits plunged 4.9% to a pace of 1.17M units during the reported month, compared to the prior month's pace of 1.23M units, whereas analysts anticipated an increase to a 1.25M-unit pace. Despite weak data on homebuilding, analysts suggested that employment would boost home construction in the upcoming months, taking into account the jobless rate at a record low of 4.3% and strong job creation.
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A quiet beginning of the week
Monday brings no solid data that could have a solid impact on the GBP/USD currency pair. Tuesday, however, brings the BoE Governor's Speech. As head of the central bank, his words have the most impact on the Sterling's exchange rate than any other person. One US data release is also scheduled for that day, namely the Current Account. It is a net flow of current transactions, including goods, services and interest payments into and out of the US. A current account surplus indicates that the flow of capital into the US exceeds the capital reduction. Wednesday does not bring a lot of data either, but traders could focus on the US Existing Home Sales, as those provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD.
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GBP/USD: a recovery is on the way
The British currency traded flat against the US Dollar on Friday, due to the absence of market movers. Upside volatility was somewhat limited by the 200-hour SMA, but it is unlikely to prevent the Pound from appreciating further, as the pair is trading within the borders of an ascending channel pattern. Although the channel is not fully confirmed yet, the exchange rate is still expected to rebound within the next two days. Technical indicators are mostly in favour of the given scenario, even though today's signals are bearish. A successful surge towards the channel's upper border, however, could only be achieved if the 1.28 major level is retaken this week—a goal the Cable failed to achieve for quite some time now.
Hourly chart
The daily chart somewhat supports the possibility of a bullish development, as the pair successfully stabilised above the monthly S1 on Friday, thus, opening the door for further gains. However, the 55-day SMA is providing significant resistance, which could still cause the Sterling to weaken and fall back to 1.27.Daily chart
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Traders remain neutral
Market sentiment remains somewhat bullish, as 54% of all open positions are long. At the same time, there are only 53% of all pending orders set to buy the British Pound.
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 is also bearish, with 60% of traders now being short and the other 40% - 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 1.28 major level by the end of the next three months, as 51% of survey participants share this belief. While the current price is around 1.2750, the average forecast for September 19 is 1.2816. The 1.24-1.26 range is now the most popular price interval, having 18% of the votes, while on the second place are the 1.20-1.22 and the 1.34-1.36 intervals, with 16% of the voters choosing each of them.