- The majority of all pending orders (55%) are to sell the Sterling
- 52% of all open positions are long
- Key demand area is at 1.2888/1.2880
- A strong resistance cluster is around 1.3140
- Upcoming events: UK CBI Industrial Order Expectations, US Initial Jobless Claims, MPC Member Cunliffe and Forbes Speeches, US Existing Home Sales, BoE Governor Carney's Speech
Britain's public sector borrowing increased less than expected in the last quarter, official figures revealed on Wednesday. According to the UK Office for National Statistics, UK Public Sector Net Borrowing climbed to 10.05 billion pounds on a seasonally adjusted basis, following the preceding quarter's 2.43 billion pound fall, which was revised down from the originally reported drop of 1.47 billion pounds. In the meantime, market analysts expected the country's public sector borrowing to rise to 10.30 billion pounds during the reported period. In a report, the Office for National Statistics stated that there were no clear signs of any impact of the British decision to leave the European Union on the public sector finances. Nevertheless, business growth slowed, according to the Bank of England's regular survey of business conditions released on the same day. Although the survey also showed that consumer spending and business sentiment rebounded slightly from the post-Brexit shock.
After the release, the British Pound dropped against the US Dollar, trading at $1.2946, its lowest level since August 16. However, the Sterling held steady against the Euro, trading at 0.8590.
US Initial Jobless Claims and Existing Home Sales
Thursday is not very rich in terms of fundamental economic data, but some events could still have an impact on the GBP/USD pair's performance today. One of these events is the US Initial Jobless Claims, which are released by the US Department of Labor, and are 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. Generally speaking, a decreasing number should be taken as positive or bullish for the USD. Another event is the Existing Home Sales, which provide an estimated value of housing market conditions. As the housing market is considered to be a sensitive factor to the US economy, it generates some volatility for the USD.
GBP/USD remains subject to weakness
The Fed's decision to keep rates unchanged weakened the American Dollar, allowing the British Pound to take the upper hand and negate Tuesday's losses yesterday. Despite a bullish development, technical studies now suggest the Cable is to decline, thus, fall back under 1.30. The GBP/USD currency pair is still expected to eventually touch the support cluster at 1.2885, where not only the weekly and the monthly S1s are located, but also the lower boundary of the post-Brexit consolidation trend. The upper border, however, is the July high of 1.3482, which will be the main target once bulls take over again.
Daily chart
Even though the GBP/USD currency pair began climbing higher since yesterday, the three-week down-trend just above 1.31 is likely to limit the gains, also being bolstered by the 200-hour SMA. Ultimately, bears are to prevail, as a U-turn is likely to take place once the down-trend is reached.
Hourly chart
Traders remain undecided
SWFX traders' sentiment remains close to being neutral, as 52% of all open positions are long and the remaining 48% are short. The majority of all pending orders (55%), on the other hand, are to sell the Sterling.
A different situation is observed elsewhere. For example, 71% of positions open at OANDA are currently long. This is more than the share of shorts (29%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 68% of traders being long and 32% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be more or less at the same level where it is now. While the current price is around 1.30, the average forecast for December 22 is 1.3192. Interestingly enough, however, the 1.30-1.32 interval is not the most popular one, having only 11% of the votes. Most of the votes are concentrated in 1.28-1.30 (15%) and 1.36-1.38 (15%) intervals. Furthermore, 55% all survey participants believe the Cable is to remain above 1.30.