- The number of orders to sell the Sterling inched up from 53 to 55%
- 58% of all open positions are short
- The nearest resistance is located at 1.3350
- Support is at 1.3175
- 59% of traders reckon GBP/USD will be at 1.30 or lower in three months
- Upcoming events: UK Manufacturing PMI, US Markit and ISM Manufacturing PMIs, UK Construction Spending, US Core PCE Price Index, US Personal Spending and Income
The number of people filing for unemployment benefits in the United States last week rose more than expected, fresh figures from the Department of Labor revealed on Thursday. Initial jobless claims grew by 14,000 to 266,000 in the week ended July 23, compared to the previous week's revised figure of 252,000, while market analysts expected jobless claims to rise by 9,000 to 261,000 in the reported week. Nevertheless, the less volatile and closely watched four-week moving average fell 1,000 to 256,500 in the preceding week, the lowest level since April. Furthermore, this week marked the 73rd consecutive week of initial jobless claims remaining below the 300,000 level, the longest streak since 1973. Meanwhile, the number of people continuing to receive unemployment aid increased by 7,000 to 2.14 million in the week ended July 16, whereas the four-week average of continuing jobless claims dropped to the lowest level since November 2000.
The Federal Reserve said on Wednesday that conditions in the US labor market improved significantly and that the latest indicators pointed to some increase in labor utilization. As markets expected, the US central bank left its key interest rates unchanged at its meeting on July 27, citing concerns over low inflation.
Manufacturing PMIs are the main drivers
Today the most impact on the GBP/USD currency pair is to have the Manufacturing PMIs from the UK and the US. The UK Manufacturing OPMI is released by both the Chartered Institute of Purchasing & Supply and the Markit Economics. It captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in UK. The US Manufacturing PMI, however, is released by the Markit Economics, while the ISM Manufacturing PMI by the Institute for Supply Management. Another possible event will be the US Construction Spending, which is an indicator that measure the total amount of spending in the US on all types of construction. The residential construction component is useful for predicting future national new home sales and mortgage origination volume.
GBP/USD attempts to keep rising
Amid weak US GDP figures the Cable was able to edge higher on Friday, completely erasing all intraweek losses. The GBP/USD pair is expected to continue climbing up today, despite technical indicators retaining bearish signals both in the daily and the weekly timeframes. The pair is now supported by a strong cluster around 1.3170, represented by the 20-day SMA, the weekly and the monthly PPs, which is likely to prompt the exchange rate to eventually retake the 1.33 major level. However, we should not rule out the possibility of the Pound sustaining a minor loss of approximately 30 pips.
Daily chart
The British currency breached the descending channel's resistance line on Friday, but was unable to climb over the 1.33 major level. However, a breach of the upper border does not imply that further bullish momentum is to prevail, as pressure could cause the exchange rate to fall back to the 200-hour SMA around 1.3160.
Hourly chart
Bulls remain in control
Traders' Sentiment Bears keep gaining numbers, as 58% of all open positions are short (previously 56%). At the same time, the number of orders to sell the Sterling inched up from 53 to 55%.
There are slightly more bulls at OANDA - they take up 54% of the positions open with the Canada-based broker (compared to 56% on Friday). Sentiment at Saxo Bank remains somewhat neutral, as here the number of bears exceeds the number of bulls by only 6 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.30 in three months
More than half of traders (59%) believe the British currency is to cost 1.30 or less dollars after a three-month period. The two most popular price intervals were selected by 25% of the voters each, namely the 1.24-1.26, while the second most popular choice implies that the Sterling is to cost between 1.28 and 1.30 dollars in three months, chosen by 19% of the surveyed. At the same time, the mean forecast for Nov 01 is 1.307.