- Share of orders placed to sell the Sterling rose from 51 to 64%
- Portion of bulls in the market plunged from 63 to 39%
- Upper boundary of the emerging channel is at 1.4440
- The 200-hour SMA is at 1.4280
- 69% of traders reckon GBP/USD will be at 1.48 or lower in three months
- Upcoming events: UK Construction PMI, FOMC Member George Speech
The Pound benefited greatly from yesterday's fundamentals. And even though some of the minor ones were below expectations, the manufacturing PMI surprised to the upside. As a result, the Sterling turned out to be the best-performing currency on Monday, gaining as much as 1.33% against the Greenback. The smallest change was recorded against the New Zealand Dollar - plus 0.35%.
British manufacturing sector improved more than expected in January, supported by a steep surge in output at large manufacturers, while exports dropped. The Markit/CIPS manufacturing PMI rose to the highest level in three months of 52.9 in January, up from 52.1 in the preceding month, overshooting forecast for 51.6 as factories output soared at the fastest pace since June 2014. The performance of large-sized manufacturers was particularly positive, whereas growth was comparatively "mild" at small and medium-sized companies, the report showed. Furthermore, the sub-index tracking new orders also increased to 52.5, whereas the new export orders index stayed below the crucial 50-mark threshold and slid to the lowest level since June. There still appears to be plenty of spare capacity in many companies, with overall employment in the sector falling for the fourth time in six months.
The manufacturing sector failed to add to the UK economic growth in 2015. Moreover, analysts warned that positive January's data was likely to be short-lived as the sector is predicted to experience headwinds in the coming future. The most recent report from the Confederation of British Industries showed total factory orders fell between December and January, while a less volatile quarterly gauge improved in the three months through January.
Switching from manufacturing to construction PMI
Following the manufacturing PMI figure released yesterday, today we are looking forward to Markit's construction purchasing managers' index. According to the expectations, the pace of industry expansion is likely to cool a bit off - 57.6 after 57.8 a month earlier.
GBP/USD closes above monthly PP
The Cable keeps balancing between gains and losses, being unable to start a new trend. However, despite the daily and monthly indicators pointing mostly south, the pair was able to rebound from 1.4230 and gain a foothold above the weekly R1 and monthly PP, which creates a good opportunity for another jump higher, though this will still be considered a part of the bullish correction. The next target could be the weekly R2, followed by a solid resistance area between 1.4636 and 1.4681.
Daily chart
In the hourly chart the currency pair has violated many of the recently established trend-lines, making them irrelevant. Still, there seems to be a new pattern emerging, and this is a bullish channel, which today implies a decline from 1.4440 towards the 200-hour SMA at 1.4280, though it may take several days for the price to cover this distance, considering decreased volatility during the first half of the week. The lower boundary of the channel is at 1.4220 dollars.
Hourly chart
SWFX sentiment deteriorates
There was a sudden and sharp shift in the sentiment, as the portion of bulls in the market plunged from 63 to 39%. At the same time, the share of orders placed to sell the Sterling rose from 51 to 64%.
As for the situation with the other brokers, OANDA clients remain net long - 58% of them are bulls, though this is also notably below yesterday's 66%. The sentiment at Saxo Bank stays neutral - at the moment 50% of positions are long and short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.50 in three months
The majority of traders (69%) believe the British currency is to cost 1.48 or less dollars after a three-month period. The most popular price interval was selected by slightly less than a quarter (26%) of the voters, namely the 1.42-1.44 one, while the second most popular choice implies 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 May 01 is 1.4518.