- The share of buy orders edged up from 62 to 69%
- Market sentiment remains bullish at 63%
- Main resistance is around 1.4270
- The nearest support is represented by the weekly S1 at 1.4082
- 68% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: UK Halifax HPI, US Jobless Claims, US Consumer Credit, Fed Chair Yellen Speech
Another day of concerns over ‘Brexit' brought weakness to the Sterling crosses on Wednesday, causing the Pound to lose value against all other major currencies. The British currency suffered the most against the Australian Dollar, namely 0.99%, as the prices of commodities surged yesterday. Against other commodity-based currencies the Sterling dropped 0.63% and 0.56% lower, namely versus the Loonie and the Kiwi, respectively. Another large slump of 0.76% was registered against the Japanese Yen, which was boosted by higher demand for safe-haven assets. The smallest decline, however, was detected versus the US Dollar, as the dovish FOMC statement caused the Buck to retreat from its intraday highs.
Fed policy makers signalled an interest-rate hike in April is unlikely, minutes of the March policy meeting showed, confirming market's growing anticipation that the US central bank will act cautiously until the global economy regains steam. US central bankers, who maintained the benchmark interest rate unchanged in March in a range of 0.25% to 0.5%, discussed the relative strength of the world's number one economy, which contrasted against persistent global headwinds. They were concerned that slowing world growth could undermine corporate investment plans and hit US exports. Fed officials expected those risks to subside only slowly. However, it was not a unanimous view. Eight of seventeen officials argued risks to the US economy were tilted to the downside, while nine said risks were balanced and none saw much likelihood that economic output would overshoot their estimates. Some officials said that the US was at or near full employment with inflation starting to climb. Only two officials wanted to raise rates at the March meeting, according to the minutes.
Policy makers had signalled at the close of March meeting that they expected to hike interest rates twice in 2016 but the timing of the hikes still remains up in the air. The Fed's next meeting is April 26-27.
Yellen's speech is the main event today
There are several events concerning the US that are due later today. First of all, the Initial Jobless Claims, released by the US Department of Labor, is a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. Second, the Consumer Credit, released by the Board of Governors of the Federal Reserve, is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means. Finally, the Fed Chair's speech is due closer to day's end. As a head of the central bank, she has most influence over the nation's currency value than any other person. She is expected to comment on yesterday's FOMC Meeting Minutes and provide insight concerning future interest rate hikes.
GBP/USD attempts to begin recovery
Fears of a ‘Brexit' kept weighing on the British Pound on Wednesday, but a rather dovish FOMC statement helped the Cable to erase most of intraday losses. As a result, the GBP/USD pair remained above the 1.41 major level. The Sterling is now expected to undergo a correction, but the exchange rate will doubtfully reach the immediate resistance at 1.4270, represented by the monthly and the weekly PPs, the 20 and the 55-day SMAs. Meanwhile, technical indicators retain mixed signals, suggesting that the pair could prolong its bearish trend and fall under the 1.41 mark, with the closest level to limit the losses being the weekly S1 at 1.4082.
Daily chart
Yesterday attempts to break through the wedge's support line were made, but the exchange rate still managed to return within the pattern's borders. Although this is a falling wedge, which implies a breakout to the upside, the violation of the lower boundary indicates that risks of a downward momentum are higher, also with higher risks of piercing the support at 1.4050. Technically, though, demand at this support area should be sufficient to cause a rebound and a consequent upward breakout.
Hourly chart
Sentiment turns bullish
Although not as strong as yesterday, but market sentiment remains bullish at 63%. The share of buy orders edged up from 62 to 69%.
Concerning the sentiment of other market participants, OANDA now has a positive outlook towards the Cable, as 57% of their open positions are long and the remaining 43% are short. Meanwhile, the sentiment at Saxo Bank improved over the day, with 51% of all open positions now being short, compared to 53% on Wednesday.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (68%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The most popular price intervals were each selected by 16% of the voters, namely the 1.38-1.40 and 1.46-1.48 ones, while the second most popular choices imply that the Pound is to cost either between 1.36 and 1.38 dollars or between 1.42 and 1.44 dollars in three months, both chosen by 13% of the surveyed. At the same time, the mean forecast for July 07 is 1.4181.
This week traders' expectations worsened even more, with 60% of Dukascopy Community members predicting the pair to lose. Alongside, the average forecast for the end of the week is placed around the 1.413 level.
This time nuonrg believes that the Sterling is to outperform the US Dollar by week's end. "Taking the shape of the daily market, this can be the inverse pattern to look for. It can retest the ranging 38.2 fib again", he commented.
Meanwhile, Besim76, another trader with the Dukascopy Community, retains a negative outlook towards the Cable. He mentioned that "the GBP/USD gained just 0.57% this week to trade at 1.4224 seeing an annual fall of 3.49% as Brexit continues to weigh on the currency. Although GDP beat forecasts recently manufacturing data was a bit weaker. The UK outlook is being dominated by the build up to the June 23rd referendum on whether the UK should leave the EU or Brexit for short."