- The portion of purchase orders edged up from 46 to 51%
- 62% of traders are long the Pound
- Immediate resistance is around 1.2675
- The closest support is at 1.2520
- Upcoming Events: US GDP Annualized, US GDP Price Index, US Durable and Core Durable Goods Orders
The British economy ignored the widely expected post-Brexit vote slowdown once again in the three month period to December, maintaining the third quarter's growth pace. According to a preliminary GDP estimate released by the Office for National Statistics on Thursday, the UK economy expanded at a quarterly pace of 0.6% in the Q4, unchanged from the Q3. Meanwhile, market analysts anticipated a 0.5% growth rate. In a report, the ONS said economic growth was mainly boosted by services that offset weaknesses in the construction and industrial sectors. The majority of economists expected the British economy to face a severe slowdown after the June 23 referendum. However, the ONS reported the annual growth rate of GDP fell 2.0% in 2016 from 2.2% in the previous year. Moreover, this decrease was mainly due to weak growth registered in the Q1 of 2016. Nevertheless, the economic outlook for 2017 looks darker, as the post-Brexit impacts are likely to become more significant.
Furthermore, the weak Pound is expected to weigh on wages and consumer spending, which is the dominant source of economic growth in the UK. According to the latest forecasts released by the Bank of England, the economy is set to grow 1.4% in 2017. However, this forecast, like all economic forecasts, is subject to change.
Attention turns to US fundamentals
On Friday all focus turns to the US fundamentals, such as the Annualized GDP and the Durable Goods Orders. GDP Annualized shows the monetary value of all the goods, services and structures produced within a country in a given period of time. GDP Annualizes is a gross measure of market activity, because it indicates the pace at which a country's economy is growing or decreasing. Another relevant event will be the GDP Price Index, which gauges the change in the prices of goods and services. Changes in the GDP Price Index are followed as an indicator of inflationary pressure that may anticipate interest rates to rise. As for the Durable Goods Orders, the measure the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments, they are sensitive to the US economic situation. The Core Durable Goods Orders, however, exclude the transport sector.
GBP/USD to slide down again
In spite of a strong UK GDP reading, the GBP/USD currency pair was unable to pierce the immediate resistance cluster, resulting in a small bearish correction, with a slip below 1.26 again. The same cluster keeps providing strong resistance today around 1.2670, implying that the Pound is to weaken against the US Dollar for the second day. The nearest demand area rests around 1.2515, which could limit possible losses, while another strong group supports is located at 1.2430, namely the monthly PP and the 55-day SMA. However, technical indicators in the daily timeframe suggest the Cable is to inch higher; nevertheless, the immediate resistance is expected to remain intact.
Daily chart
A breakout occurred much earlier than was anticipated, with the trend-line being unable to keep the Cable elevated today. The next target is now the 200-hour SMA, which is likely to be put to the test if bears continue pushing the GBP/USD pair lower.
Hourly chart
Traders mostly bullish
Traders' sentiment remains bullish at 62%, while the portion of purchase orders edged higher over the day, namely from 46 to 51%.
A slightly less optimistic situation is observed elsewhere. For example, 56% of positions open at OANDA are currently long. This is more than the share of shorts (44%), barely sufficient for the sentiment to be called bullish. However, sentiment at Saxo Bank reached a perfect equilibrium, with 50% of traders being short and 50% being long 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 53% of survey participants believe so. While the current price is around 1.23, the average forecast for April 27 is 1.2217. However, the 1.14-1.16 interval is now the most popular one, having 19% of the votes, while on the second place is the 1.20-1.22 price range, with 14% of poll participants choosing it. Furthermore, the 1.18-1.20 interval was chosen by 13% of the voters.