- 63% of all pending orders are to sell the Pound
- Bulls keep taking up 61% of the market
- Immediate resistance is at 1.2365
- The closest support is at 1.2254
- Upcoming events: US Labor Market Conditions Index, US Federal Budget Balance
According to the Officials figures, Britain's industrial output dropped in August while the trade deficit widened. The Office for National Statistics announced that industrial production decreased 0.4% in August after a 0.1% rise in July. The data was smaller, than economists' predictions of another 0.1% increase. It is evident, that export was spurred by the weak pound, which touched new 31-year lows against the dollar on Friday due to the worries over the UK's prospects outside the EU. Nevertheless, industrial production is only a small part of the UK economy. Manufacturing production, in turn, went up less than expected in August, by a seasonally adjusted 0.2% in August, worse than expectations for a gain of 0.5% and following a drop of 0.9% a month. The UK manufacturers have reported an advance in both domestic and overseas demand, but imports are now more expensive as sterling depreciates.
In the meantime, several economists have pointed to a series of surveys showing rising business confidence, as evidence that Brexit has not hit the economy. But, while sentiment has bounced back, hard figures on actual output have been less encouraging.
Uneventful beginning of the week
Tuesday is rather quiet in terms of fundamental data, with no significant events due, but on Wednesday the most important event will be the FOMC Meeting Minutes. FOMC stands for the Federal Open Market Committee, that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.
GBP/USD risks falling under 1.23
Monday ended with the British currency falling against the US Dollar, crossing the 1.24 level. Technical studies are now giving bearish signals, suggesting that another decline is due. The nearest level to limit the losses is located only at 1.2254, represented by the monthly S3, but the 1.23 major level should also be considered as a potential psychological support. A failure to rebound after reaching the monthly S3 is likely to set the Cable on the bearish path until Friday's sudden plunge is reached, namely the 1.1950 mark.
Daily chart
The Cable continued to trade within the borders of a descending channel pattern yesterday, now having the potential to put either the channel's support line or the resistance line to the test. However, the most likely outcome is a small bearish development, with the exchange rate remaining relatively in between the channel's borders, namely around 1.23.
Hourly chart
Traders remain undecided
Bulls keep taking up 61% of the market today, while the share of sell orders also remains mostly unchanged, as there are now 63% of them , compared to 65% on Monday
A similar situation is observed elsewhere. For example, 57% of positions open at OANDA are currently long. This is more than the share of shorts (43%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is strongly 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 higher than the level where it is now. While the current price is around 1.23, the average forecast for January 11 is 1.3012. Interestingly enough, however, the 1.30-1.32 interval is not the most popular one, having only 12% of the votes. Most of the votes are concentrated in 1.28-1.30 (17%) interval, followed by the 1.32-1.34 price range with 14% of the votes. Furthermore, 51% all survey participants believe the Cable is to climb over 1.30.