- The portion of sell orders rose to 60%
- 64% of all open positions are long
- Immediate resistance is around 1.2245
- The closest at is around 1.2138
- Upcoming events: UK CBI Industrial Order Expectations, FOMC Members Dudley and Bullard Speeches, US Markit Manufacturing PMI
Britain's retail sector proved to be slightly worse than expected, as the amount of items bought missed expectations. According to the Office for National Statistics, retail sales increased 4.1% on an annual pace in September, compared to a 6.6% advance in August and analysts' expectations for a 4.9% gain. Meanwhile, clothing and footwear sales lost 2.8% after prices skyrocketed 5.2%, showing the biggest jump in six years. Moreover, Britain also enjoyed one of the warmest Septembers on record, thus people was not obliged to buy autumn clothes.
Core retail sales, in turn, which exclude automobile sales and fuel, did not show any changes last month, compared to the previous 0.1% decrease in August which was revised up from an initial reading of a 0.3% decline. Analysts had expected core retail sales to add 0.4% last month. The following figures suggest the economy is continuing to be influenced by consumer spending, with retail sales contributing 0.1% to gross domestic product in the third quarter. Annual sales growth in the third quarter held at 5.4%, the strongest since the start of last year.
Relatively quiet Monday
Today traders can focus on the US Markit Manufacturing PMI, which 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 the United States. Readings above 50 imply the economy is expanding, making investors understood it as bullish for the USD, whereas a result below 50 points for an economic contraction, and weighs negatively on the currency. There are no other significant fundamental data releases that should have an impact on the GBP/USD pair's performance today.
GBP/USD to slip for the fourth time
There were no surprises on Friday, as the GBP/USD currency pair experienced the anticipated decline, also managing to remain above the 1.22 major level. The outlook remains unchanged, with the Cable expected to keep sliding down today. However, the 1.22 mark now risks getting broken, despite technical indicators retaining mixed signals in all timeframes. Meanwhile, a tough resistance area is weighing on the pair just above the opening price, whereas the weekly S1 at 1.2138 acts as the nearest support; however, the exchange rate is unlikely to reach the given support level today.
Daily chart
The GBP/USD pair prolonged its bearish momentum on Friday, putting the possible new ascending channel's support line to another test. Furthermore, the Cable provided the channel's lower boundary with an additional confirmation earlier today, indicating that a rebound could occur today (contradicting with the daily outlook). A successful attempt to pierce the 200-hour SMA is likely to set the Sterling on a bullish path until the 1.24 level is reached.
Hourly chart
Traders mostly bullish
Today 64% of all open positions are long, compared to 67% on Friday. At the same time, the portion of sell orders added two percentage points over the weekend, having risen to 60%.
A similar situation is observed elsewhere. For example, 60% of positions open at OANDA are currently long. This is more than the share of shorts (40%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 66% of traders being long and 34% 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 24 is 1.2577. Furthermore, the 1.28-1.30 interval is now the most popular one, having 12% of the votes. On the second place in terms of the votes is the 1.32-1.34 (11%) interval, followed by the 1.16-1.18, 1.18-1.20 and 1.20-1.22 price ranges with 10% of the votes each. Moreover, 69% all survey participants believe the Cable is to fall under 1.30.