- All pending orders are equally divided between the buy and the sell ones
- Bullish traders' sentiment returned to its Tuesday's level of 69%
- Main resistance is at 1.4082
- The nearest support is represented by the monthly S1 and the Bollinger bad around 1.40
- 63% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: UK Manufacturing Production, UK Goods Trade Balance, UK Industrial Production, FOMC Member Dudley Speech, UK NIESR GDP Estimate, US Wholesale Inventories
Another day of ‘Brexit' jitters caused the Sterling to decline against most major peers, with some exceptions against the commodity-based currencies. The British currency sustained the heaviest loss versus the Japanese Yen, namely 1.91%, which was boosted by the risk-off sentiment yesterday. Less losses of 0.47%, 0.46% and 0.29% were registered against the US Dollar, the Swiss Franc and the Euro, respectively. Concerning gains, the Pound managed to outperform the Aussie, adding 0.77%, and the Kiwi, adding 0.22%. The GBP/CAD also remained relatively unchanged, having edged 0.05% lower. Falling commodity prices were the main reason of commodity currencies on Thursday.
Fed Chair Janet Yellen said that the US central bank did not make a mistake in hiking interest rates in December, a move that was followed by massive turbulence in financial markets and further weakening of the global economy. Yellen said that as the US economy remains on a solid ground with some signs of inflation. Moreover, seven years after the severe financial crisis, the US labour market was now close to full employment, arguing that inflation would not be held down much longer by a strong US Dollar and low oil prices. Therefore, the Fed remains on track for further interest rate increases. The Fed lifted its benchmark policy rate in December, the first increase in nearly a decade, to between 0.25% to 0.5%. A number of private economists believe the next hike will not occur until June.
The number of Americans who applied for new jobless benefits declined last week, the latest sign of a strong labour market. Initial claims for unemployment benefits, a proxy for layoffs across the US economy, declined by 9,000 to a seasonally adjusted 267,000 in the week ended April 2, according to the Labor Department. Last week was the 57th consecutive week that initial jobless claims remained below 300,000, extending the longest streak below that threshold since 1973.
UK Manufacturing Production and NIESR GDP Estimate
Concerning the UK side, most attention should be paid to the UK Manufacturing Production. The Manufacturing Production, released by the National Statistics, measures the manufacturing output. Manufacturing Production is significant as a short term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP. The second event at 14:00 PM GMT is the GDP Estimate, released by the National Institute of Economic and Social Research, which is an estimate of growth over the last 3 months up to the report which comes out a month before the official announcement. The report is highly reliable and would influence the UK monetary policy.
GBP/USD takes another shot at rebounding
The British Pound plunged against the US Dollar for the third consecutive day yesterday, amid concerns over ‘Brexit' continuing to weigh on the Sterling. The bottom target is now the monthly S1 at 1.4005, which is also bolstered by the Bollinger band today. In case this area gives in, the second demand level at 1.3932, namely the weekly S2, is expected to keep the Pound from falling deeper. Although the bearish scenario is more likely, we should not rule out the possibility of the GBP/USD pair undergoing a bullish correction and, thus, climbing back over the 1.41 psychological level.
Daily chart
On the hourly chart the GBP/USD is seen retesting the wedge's lower boundary for another time. The 1.4050 support line also keeps preventing the Cable from edging lower and might provide the required boost for an upside breakout, which tend to occur after wedge patterns are complete.
Hourly chart
Sentiment turns bullish
Bullish traders' sentiment returned to its Tuesday's level of 69%, compared to 63% yesterday. At the same time, all pending orders are equally divided between the buy and the sell ones.
Concerning the sentiment of other market participants, OANDA now has a positive outlook towards the Cable, as 58% of their open positions are long and the remaining 42% are short. Meanwhile, the sentiment at Saxo Bank improved and shifted to the bullish side, with 51% of all open positions now being long, compared to 49% on Thursday.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (63%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The most popular price interval was selected by 18% of the voters, namely the 1.46-1.48 ones, while the second most popular choice implies that the Pound is to cost between 1.38 and 1.40 dollars in three months, chosen by 15% of the surveyed. At the same time, the mean forecast for July 08 is 1.4213.
This week traders' expectations worsened even more, with 60% of Dukascopy Community members predicting the pair to lose. Alongside, the average forecast for the end of the week is placed around the 1.413 level.
This time nuonrg believes that the Sterling is to outperform the US Dollar by week's end. "Taking the shape of the daily market, this can be the inverse pattern to look for. It can retest the ranging 38.2 fib again", he commented.
Meanwhile, Besim76, another trader with the Dukascopy Community, retains a negative outlook towards the Cable. He mentioned that "the GBP/USD gained just 0.57% this week to trade at 1.4224 seeing an annual fall of 3.49% as Brexit continues to weigh on the currency. Although GDP beat forecasts recently manufacturing data was a bit weaker. The UK outlook is being dominated by the build up to the June 23rd referendum on whether the UK should leave the EU or Brexit for short."