- The portion of buy orders edged lower from 51 to 47%
- Traders' sentiment takes up 54% of the market
- The weekly PP forms resistance at 1.4563
- Support is around 1.4440, represented by the weekly S1 and the monthly PP
- 62% of traders reckon GBP/USD will be at 1.44 or higher in three months
- Upcoming events: UK Construction PMI, US ADP Non-Farm Employment Change, US Preliminary Nonfarm Productivity and Unit Labor Costs, US Trade Balance, US Markit Services PMI, US ISM Non-Manufacturing PMI, US Factory Orders, US Crude Oil Inventories
Due to a poor reading of the UK Manufacturing PMI on Tuesday, the Sterling sustained losses against most major peers, with exception against the commodity-based currencies. The Pound lost the most versus the US Dollar and the Swiss Franc, having edged 0.94% and 0.93% lower against them, respectively. At the same time, the British currency dropped 0.75% against the Yen and 0.62% versus the Euro, whereas amid falling oil prices managed to post gains against commodity currencies. Although gains against the Loonie were only 0.60% and 58% against the Kiwi, the Sterling added 1.47% versus the Australian Dollar, due to the RBA's unexpected interest rate cut.
Atlanta Federal Reserve President Dennis Lockhart said that the UK's referendum on whether to leave the EU could "loom large" as the Fed weigh whether to hike interest rates at its next policy meeting. Lockhart underlined that Brexit could potentially lead to heightened global uncertainty. Yet, the policy maker added that the US economy could warrant a rate hike when the Federal Open Market Committee meets on June 14-15. Lockhart said the market seemed to be underestimating the odds of a rate lift in June. Investors currently only assign a 12% chance of such a move, according to pricing in interest rate futures contracts. Lockhart said two rate hikes this year are certainly possible. Lockhart is not a voting member of the Fed's FOMC, but his view is seen as a bellwether for what the majority on the central bank is thinking.
Also, San Francisco Fed President John Williams said he is optimistic about the US economy and was giving little weight to the slowdown in first quarter gross domestic product. However, Williams added that he would support an interest rate hike in June as long as he sees sturdy progress on the economy, inflation and jobs. Fed officials left their target range for the benchmark policy rate steady at 0.25% to 0.5% when they met last week, saying that they will "closely monitor" the world situation.
UK Construction PMI, US ADP Non-Farm Employment Change and the US Services PMI
Today attention should be paid to the UK Construction PMI, which is released by the Chartered Institute of Purchasing & Supply and Markit Economics, and shows business conditions in the UK construction sector. It is worth noting that the construction sector does not influence, either positively or negatively, the GDP as much as the Manufacturing sector does. Another event worth paying attention to is the US ADP Non-Farm Employment Change. It is released by the Automatic Data Processing, Inc., and 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. Furthermore, the US Services PMI is due later today. It captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in the US.
GBP/USD attempts to retake 1.46
The British Pound retreated from its intraday gain on Tuesday, weakened by the UK Manufacturing PMI, with price ultimately closing with a 138-pip loss. Even though technical indicators retain bullish signals in the daily timeframe, the GBP/USD currency pair risks sustaining another sharp decline today. In this case the exchange rate is to fall towards the immediate support cluster around 1.4440, represented by the weekly S1 and the monthly PP. A drop beyond this level would imply a fall towards 1.4385, where the 20-day SMA coincides with the 100-day one. On the other hand, positive fundamentals could help the Cable retake the 1.46 major level today.
Daily chart
The pair was unable to maintain its Tuesday's bullish momentum, which was acquired after another retest of the channel's lower border. Ultimately, the pattern's support line was violated, which led to a decline towards the 200-hour SMA, where the Cable keeps trying to begin a recovery. With the breach of the channel's boundary, the exchange rate could now enter a short-term bearish trend and find support only around the 1.40 major level.
Hourly chart
Bulls now in the majority
Traders' sentiment is now bullish, taking up 54% of the market, whereas the portion of buy orders edged lower from 51 to 47%.
At OANDA market sentiment once again reached a perfect equilibrium today, as 50%% of their open positions are long. Meanwhile, the sentiment at SAXO Bank also edged closer to equilibrium, with 51% of their traders holding short positions (previously 58%).
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.44 in three months
The majority of traders (62%) believe the British currency is to cost 1.44 or more dollars after a three-month period. The most popular price interval was selected by slightly more than a quarter (31%) of the voters, namely the 1.44-1.46 one, while the second most popular choice implies that the Sterling is to cost between 1.46 and 1.48 dollars in three months, chosen by 17% of the surveyed. At the same time, the mean forecast for May 04 is 1.4385.
Dukascopy Community members, however, have mostly bearish perspective while the consensus forecast stands for 1.44-mark, still above last week's average price of 1.42. Furthermore, equal number of respondents are having bullish and bearish views on the pair.
Among the bullish traders, edlim suggests that "currently, price found resistance at 1.4640 and could consolidate closer towards 1.4500. Month-to-date, price is still making higher highs and lows."
Meanwhile, megajorko believes that the Cable is to edge lower by week's end, suggesting that "Even after the strong bullish momentum cable has still uncertainties about eventual Brexit." "After the US dollar gaining force it will be very strange if the pair goes up. I do not see any other major news next week so a price between present 1.44 and 1.4 (50% )", he added.