- The portion of orders to acquire the Sterling takes up 63% of the market
- 61% of traders hold long positions
- The main short-term resistance lies around 1.4390
- Support is at 1.4255, namely the weekly S1
- 54% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Retail Sales, UK Public Sector Net Borrowing, US CPI and Core CPI, UK CB Leading Index
As risk-appetite increased on Thursday, the British Pound was able to outperform most major currencies, except for the Japanese Yen. The largest gains of 0.71% and 0.68% were registered against the commodity-sensitive currencies, such as the Loonie and the Aussie, respectively. The Kiwi, however, was more resilient, as the Sterling managed to gain only 0.13% against it. At the same time, the British currency added 0.50% versus the Euro and 0.35% versus the Swissie, while the Cable edged 0.30% higher. The Yen was able to take advantage of its safe haven status and outperform the GBP by 0.45%.
The number of Americans applying for unemployment benefits unexpectedly declined last week, reinforcing the view the labour market continued to strengthen. Initial claims for state unemployment benefits decreased 7,000 to a seasonally adjusted 262,000 for the week ended Feb. 13, the lowest level since November, according to the Labor Department. The previous week's claims were unrevised. The four-week moving average of claims, which irons out week-to-week volatility, dropped by 8,000 to 273,250 last week. Claims have now been below the 300,000 threshold, which is associated with a healthy labour market, for 50 consecutive weeks - the longest stretch since the early 1970s. The gauge declined 12,000 between the January and February survey periods, suggesting a pick-up in job growth. At the same time, nonfarm payrolls rose by 151,000 in January.
The health of the jobs market could determine whether the Fed hikes rates this year. How quick these lifts will come, though, will depend on how fast inflation pressures are able to bounce back after being kept at bay by cheap oil and lower costs of imports. Bets for a March rate hike have largely been eliminated due to tightening financial market conditions and concerns about the domestic and global economies.
UK Retail Sales and Public Sector Net Borrowing against US inflation data
Rather positive data is expected to be released concerning the UK economy, namely the MoM Retail Sales and the Public Sector Net Borrowing. The Retail Sales are released by the National Statistics and 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. As for the Net Borrowing, it is the difference in value between spending and income for public corporations, central and local governments for the preceding month. From the US side, the inflation figures are due. The Consumer Price Index is released by the US Bureau of Labor Statistcsis, and is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. The Core CPI, however, excludes Food & Energy. At the same time, the Core CPI is expected to grow, thus, strengthening the US currency, while the normal CPI is to show no signs of improvements.
GBP/USD under the risk of falling below 1.43
Although the Cable edged closer to the resistance cluster around 1.44, it stabilised at lower at 1.4340. Nonetheless, the bullish momentum prevailed yesterday and could even push the GBP/USD above 1.44 today. Technical indicators also suggest the pair extend its gains, however, a strong impetus is required for the rally to overcome the immediate resistance. Chances of the Pound suffering a loss are higher, which the nearest support, namely the weekly S2 at 1.4255, will doubtfully be able to stop.
Daily chart
The Cable's volatility remains mild, as the pair seems to be anchored around the .143 major level, refusing to maintain trade away from it. A possible rally above 1.44 should now be limited by the 200-hour SMA, along with the resistance trend-line. The support line was broken, suggesting that more GBP/USD weakness could come.
Hourly chart
Three brokers - three sentiments
Bulls remain strong, as 61% of traders hold long positions today, compared to 58% on Thursday. At the same time, the portion of orders to acquire the Sterling added 7% points, rising up to 63%.
The clients of the other two brokers seem to have different opinions on GBP/USD. OANDA traders are bullish on the UK currency. Right now, 60% of them are long, unchanged since yesterday. At the same time, Saxo Bank traders are net short the currency pair: 56% of open positions are short and 44% are long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (54%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price intervals were each selected by 13% of the voters, namely the 1.46-1.48, the 1.42-1.44 and the 1.36-1.38 ones, while the second most popular choice implies the Pound is to cost either between 1.38 and 1.40 dollars or between 1.40 and 1.42 dollars or even between 1.48 and 1.50 dollars in three months, all three chosen by 12% of the surveyed. At the same time, the mean forecast for May 19 is 1.4471.
This week the pair's sentiment strengthened, as now 78% of all votes are bullish on the cross, compared to the previous 66.7%. The average expectation for February 19 stays around the 1.461 level.
A trader with a positive outlook towards the GBP/USD, namely babanu, suggests that "for the British Pound things might develop slightly different than the Euro". He believes that if the weekly pivot will hold, then we might see the previous highs of 1.4650 level reached.
Among the minority of traders, that hold short positions, locked said that he expects the Sterling to continue its bearish trend and end the week lower.