- The portion of orders to sell the Cable increased from 59 to 61%
- Bears now take up 53% of the market
- The nearest resistance is at 1.3222
- Immediate support is at 1.3170
- 53% of traders reckon GBP/USD will be at 1.30 or lower in three months
- Upcoming events: US HPI, US Existing Home Sales, US Crude Oil Inventories, US Durable and Core Durable Goods Orders, US Jobless Claims, US Markit Services PMI
New home sales in the United States rose more than expected in July, official data showed on Tuesday. According to the Department of Commerce, new home sales increased 12.4% to a seasonally adjusted annual rate of 654,000 in the seventh month of the year, reaching the highest level since October 2007. Meanwhile, the preceding month's reading was revised down to 582,000 from the originally reported 592,000 units. Market analysts penciled in a slight deceleration to 575,000 units in the reported month. July's surge probably exaggerates the housing market strength, as new single-family home sales are extremely volatile month-to-month; still, they were 31.3% higher than a year ago. The data also showed that new single family home sales jumped 40.0% in the American Northeast, as well as grew 1.2% in the Midwest region. Sales in the South rose 18.1% to their best level since July 2007, whereas the West region remained flat last month.
Furthermore, inventories of new homes for sale dropped 2.9% to 233,000 units in July, the lowest level since November 2015. The median price of a new single-family home fell 0.5% year-over-year to $294,600. The US Dollar rose slightly after the release, trading at 1.1326 against the Euro, 100.11 against the Japanese Yen and 1.3186 against the British Pound.
US Existing Home Sales and Housing Price Index
Wednesday is also rather quiet in terms of fundamental data releases, with the only relevant one being the US Housing Price Index. It provides an estimated value of housing market conditions and is an important indicator as the housing market is considered as a sensitive factor to the US economy. Another possible release of relevance could be the US Existing Home Sales, which provide an estimated value of housing market conditions. It generates some volatility for the USD.
GBP/USD to make a U-turn
The US Dollar was dragged down by a poor reading of the Manufacturing PMI on Tuesday, allowing the Sterling to take the upper hand and breach the monthly PP resistance level. As a result, the Cable reached the 1.32 major level, where supply was sufficient to limit the rally. The GBP/USD pair is now expected to make a U-turn, ignoring the monthly PP, which is now providing support. Potentially, the bearish momentum today could last until the Pound touches the 20-day SMA on top of the 1.31 mark, although a close around 1.3140 is the base case scenario.
Daily chart
Tuesday ended with a breach of the 1.3175 resistance level, but with the 1.32 major level somewhat reversing the movement. Nevertheless, a bearish development is expected to last until the 1.3140 level is reached, where a possible up-trend is to trigger more Sterling-buying.
Hourly chart
Still no consensus
Bears are now in the majority, taking up 53% of the market, compared to 46% on Tuesday. Meanwhile, the portion of orders to sell the Cable increased from 59 to 61%.
Indecision appears to be widespread, as the same neutral sentiment is observed among the traders of other brokers. At OANDA, 52% of positions are long and 48% are short. The sentiment at Saxo Bank is now bearish, as the numbers of longs and shorts each take up 46% and 54% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees the GBP/USD below 1.30 in three months
Slightly more than half of traders (53%) believe the British currency is to cost 1.30 or less dollars after a three-month period. The most popular price interval, however, was selected by 13% of the voters, namely the 1.26-1.28, while the second most popular choice implies that the Sterling is to cost between 1.34 and 1.36 dollars in three months, chosen by 12% of the surveyed. At the same time, the mean forecast for Nov 24 is 1.3066.