- 56% of all pending orders are to acquire the Pound
- 63% of traders are long the Sterling
- Immediate resistance is around 1.27
- The closest support is circa 1.25
- Upcoming Events: US ADP Non-Farm Employment Change, US Manufacturing PMI, US Crude Oil Inventories, US Construction Spending, US Federal Funds Rate
Consumers' mood in the United States deteriorated markedly in January, a monthly survey revealed on Tuesday. The Conference Board said its Consumer Confidence Index dropped to 111.8 points in January after hitting 113.7, the highest level in 15 years, in the preceding month, while market analysts anticipated a slighter decrease to 112.6 during the reported period. The survey showed that consumers' assessment of current conditions improved in January. Those stating business conditions are "good" increased to 29.3% from 28.6% in December, whereas those saying conditions were "bad" decreased to 16.1% from 17.8% in the prior month.
Nevertheless, consumers' short-term outlook turned significantly more negative in January, falling to 23.1% from the previous month's 24.7%. Furthermore, the share of those expecting business conditions to worsen rose to 10.7% from December's 8.9%. In addition, the proportion of those expecting more jobs in the upcoming months fell to 19.8% from December's 21.7%, while the percentage of those expecting less jobs remained unchanged at 14.0%. The proportion of those expecting their income to improve declined to 18.0% from 21.5%, whereas the share of those expecting an income drop climbed to 9.6% from 8.6% registered in the previous month.
US data in focus again
Once again all attention turns to the US fundamentals. First of all, the ADP Non-Farm Employment Change, which is a measure of the change in the number of employed people in the US. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth. Construction Spending could also have some impact, as it is an indicator that measure the total amount of spending in the US on all types of construction. The residential construction component is useful for predicting future national new home sales and mortgage origination volume. The most important event today, however, is the Federal Funds Rate. With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one being the interest rate that it will charge on loans and advances to commercial banks. In the US, the Board of Governors of the Federal Reserve meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of a healthy inflation. A rate cut, on the other hand, is seen as a sigh of economic inflationary woes and, therefore, tends to weaken the local currency. If rates remain unchanged, attention turs to the tone of the FOMC statement, and whether the tone is hawkish or dovish over future developments of inflation.
GBP/USD takes another shot at 1.26
The GBP/USD pair managed to erase most of Monday's losses yesterday, but with the 1.26 mark once again providing sufficient resistance, preventing the Cable from edging further up. Today the Pound could go sideways, with the 100-day SMA at 1.2481 expected to limit any possible losses. However, technical studies suggest a positive development could occur, in which case the main target will be the 1.27 mark, where the 23.60% FIbo, the weekly R1 and the upper Bollinger band form relatively strong resistance. The given pair is unlikely to surge significantly beyond 1.26, unless weak US fundamentals provide sufficient impetus today.
Daily chart
Although the Cable crossed the 200-hour SMA to the downside yesterday, it soon managed to recover and close near the 1.26 mark. The recovery suggests that the support around the 200-hour SMA remains strong and that there is a solid chance for another rally, with the 1.26 mark getting overcome.
Hourly chart
Traders mostly bullish
Now 63% of traders are long the Sterling (previously 60%), whereas 56% of all pending orders are to acquire the Pound (up from 45%).
A slightly less optimistic situation is observed elsewhere. For example, 57% of positions open at OANDA are currently long. This is more than the share of shorts (43%), barely sufficient for the sentiment to be called bullish. However, sentiment at Saxo Bank slightly weakened over the day, with 54% of traders now being long and 46% 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 51% of survey participants believe so. While the current price is around 1.25, the average forecast for April 30 is 1.2262. However, the 1.14-1.16 interval is now the most popular one, having 18% 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 1.30-1.32 interval was chosen by 12% of the voters.