- Pending orders in the 100-pip range are at equilibrium
- 59% of traders are bearish on the Pound
- Important support lies near 1.3840
- Upcoming events: FOMC Members Evans and Kashkari to speak
The Sterling strengthened significantly against the US Dollar, as all the main components of the UK retail sales report showed better-than-expected figures for August. After the release, the GBP/USD jumped by 0.67% or 91 base point to touch the daily high of 1.3606 However, by the next couple of hours the pair resumed trading in a weaker area between the 1.3525 and 1.3560 marks.
The most important fundamental event that is likely to shake the given currency pair in this session is the speech by the British Prime Minister Theresa May; the time, however, is still tentative. In addition, there are some minor releases scheduled for today, such as the UK CBI Industrial Order Expectations at 1000GMT and the US Flash Manufacturing PMI and Flash Services PMI at 1345GMT.
FOMC Members to speak
Fundamental events that should be monitored in this session are speeches by two members of the Federal Open Market Committee. The President of the Federal Reserve Bank of Chicago Charles Evans is to speak about economic conditions and monetary policy at The Economic Club of Grand Rapids Luncheon Meeting at 1640GMT. Meanwhile, the President of the Federal Reserve Bank of Minneapolis Neel Kashkari is to discuss the Federal Reserve at a town hall event hosted by the University of North Dakota at 2230GMT.
GBP/USD tries to restore lost positions
The speech delivered by Theresa May about post-Brexit relationship with the EU on Friday, indeed affected value of the Pound. Unfortunately, the effect was negative and the British currency just in one hour lost 79 points against the Dollar.
Probably the best description of this situation was made by the German Foreign Minister who noted that the speech was vague and did not contain any concrete proposals. Accordingly, the rectangle pattern that formed in the beginning of previous week sustained and is likely to sustain today as well.
On the one hand, the rate feels pressure from the 55- and 100-hour SMAs together with the weekly PP at 1.3536 that pushes it to the top. However, the expected target for today would be an area around 1.3585, but not the upper edge of the formation.
Hourly chart
GBP/USD has not left the upper wedge boundary for the last six trading sessions, thus being stranded between this line and the monthly R2 at 1.35. The rate shows reluctance to move any higher; however, it has likewise failed to reverse to the downside. Technical indicators suggest that the rate should eventually turn south, possibly targeting the 20-day SMA and the monthly R1 near 1.32.
Daily chart
Market sentiment is bearish
The bearish market sentiment has once again taken the upper hand, as the number of short positions on Friday is 59% (+3%). Meanwhile, 54% of pending orders are to buy the Pound.
OANDA traders are bearish on the pair, as 64% of open positions are short (+1%). Traders at Saxo Bank are likewise bearish with 66% short positions (-4%).