- 55% of all pending orders are to sell the Sterling
- 71% of all open positions are long
- Immediate resistance is at 1.2324
- The closest support is at 1.2260
- Upcoming Events: US Building Permits, Philadelphia Fed Manufacturing Index, US Initial Jobless Claims, US Housing Starts, US Crude Oil Inventories
The unemployment rate in Britain held steady last month, while the number of unemployment benefit claims declined, surpassing analysts' expectations. Official data published by the Office for National Statistics on Wednesday showed claims for unemployment aid dropped 10,000 in December, while economists anticipated a gain of 2,500. Though the number of female claimants was 600 higher than men. The November rate was revised down to 1,300 from the originally reported 2,400. Meanwhile, the unemployment rate remained unchanged at its 11-year low of 4.8%, matching market forecasts. However, the number of employed people dropped 52,000 to 1.6 million in the three month period to November, the lowest level since 2006. The ONS also reported the Average Earnings Index increased 2.8% year-over-year. The reading slightly topped economists' expectations for an increase of 2.6%. Excluding bonuses, earnings advanced 2.7%, the largest gain since mid-2015.
The earnings figure is closely followed by the Bank of England since the Brexit vote. According to the latest inflation forecasts, the current average earnings growth is unlikely to significantly boost inflation, though the weakening labour market is likely to cut consumer spending, harming the economy's growth outlook.
US Building Permits and Philly Fed Manufacturing Index
On Thursday there are some important evets from the US side, but the main event is still due on Friday, Trump's inauguration. Today, however, traders can focus on the US Building Permits, as they show the number of permits for new construction projects. It implies the movement of corporate investment (US economic development). It tends to cause some volatility to the USD. Another event will be the Philadelphia Fed Manufacturing Survey. It is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of the ISM Index.
GBP/USD gravitates towards 1.23
The Cable's decline exceeded expectations on Wednesday, as it easily pierced the immediate demand area and found support only at the second target, namely the 20-day SMA. The Pound remains under the risk of falling deeper down, in which case the weekly PP at 1.2181 will be the level to focus one. On the other hand, ahead of Trump's inauguration tomorrow the Sterling has the potential to gain a few pips, reclaiming the 1.23 mark once again and with the immediate resistance, the weekly R1, doubtfully limiting the gains. Technical indicators, however, are unable to confirm either scenario, as all of them are now giving mixed signals.
Daily chart
The hourly chart does not clarify the picture, as at the moment the GBP/USD pair is mostly driven by political events, rather than fundamentals. The pair is expected to take a breather until Trump's speech on Friday, that is when volatility is likely to kick in.
Hourly chart
Traders mostly bullish
Bullish sentiment keeps growing weaker, as 71% of all open positions are now long, compared to 72% on Wednesday. Meanwhile, the share of sell orders inched up from 52 to 55%.
A slightly less optimistic situation is observed elsewhere. For example, 64% of positions open at OANDA are currently long. This is more than the share of shorts (36%), barely sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 63% of traders being long and 37% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
By the end of the next three months traders expect the Cable to fall under the 1.22 major level, as 57% of survey participants believe so. While the current price is around 1.23, the average forecast for April 19 is 1.219. However, the 1.14-1.16 interval is now the most popular one, having 17% of the votes, while on the second place is the 1.18-1.20 price range, with 16% of poll participants choosing it. Furthermore, the 1.16-1.18 and the 1.20-1.22 intervals were each chosen by 12% of the voters.