- 58% of all open positions are long
- 72% of all pending orders to purchase the Pound
- Key demand area is at 1.2894/1.2880
- The closest resistance is around 1.3001
- Upcoming events: US New Home Sales, US Markit Services PMI, US CB Consumer Confidence, FOMC Member Fischer Speech
The number of Americans filing for unemployment benefits fell sharply last week, official figures revealed on Thursday. According to the US Department of Labor, initial claims for jobless benefits dropped 8,000 to a seasonally adjusted rate of 252,000 in the week ended September 16, touching the lowest level since mid-July. Meanwhile, market analysts expected initial jobless claims to rise to 261,000 last week from the preceding week's 260,000. Filings for US unemployment benefits remained below the 300,000 level for the 81st consecutive week, the longest streak since 1973. The four-week moving average of initial claims, considered a better measure of labor market trends, declined 2,250 to 258,500 last week. The US Dollar Index, which measures its strength against a trade-weighted basket of six major currencies, fell 0.45% to 95.03, the lowest level since September 12, despite upbeat data.
Other data released by the National Association of Realtors (NAR) showed sales of previously owned US homes unexpectedly declined to a seasonally adjusted annual rate of 5.33 million units in August, following the previous month's 5.38 million unit pace and falling behind the 5.45 million unit rate market forecast. The drop was mainly driven by a shortage of properties for sale as it lifted home prices higher.
US New Home Sales is the only relevant event today
There is only one important event on Monday that can influence the Cable, namely the US New Home Sales. The number of New Home Sales released is released by the US Census Bureau. It is an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes so as a result the demand for goods, services and employees is stimulated. Generally, a high reading is seen as bullish for the USD, whereas a low reading is seen as bearish.
GBP/USD remains on the back foot
On Friday the British currency underperformed, having experienced a much sharper decline than anticipated, with the Bollinger band managing to contain downside volatility. Furthermore, the Cable closed below the 1.30 mark, once again leaving the door open for a drop towards the 1.2880 area, where a potential support line is located. Moreover, this support line is also bolstered by the monthly S1 and the Bollinger band, suggesting a decline beyond this area is unlikely. Despite bearish technical indicators, the pair could still attempt to reclaim the 1.30 level, where the weekly PP is located.
Daily chart
Since the Cable reached the resistance trend-line on Thursday, the pair has been heading lower. However, the 1.2945 appears to be providing sufficient support to prevent the pair from continue declining along the path of the descending channel pattern. As a result, we could soon see another retest of the down-trend.
Hourly chart
Traders remain undecided
Bullish traders' sentiment slightly improved over the weekend, as now 58% of all open positions are long (previously 55%). There are also significantly more orders to purchase the Pound, namely 72%.
A different situation is observed elsewhere. For example, 72% of positions open at OANDA are currently long. This is more than the share of shorts (28%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 70% of traders being long and 30% 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 26 is 1.3149. 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 (17%) intervals. Furthermore, 52% all survey participants believe the Cable is to remain above 1.30.