- The share of sell orders inched up from 52 to 58%
- 57% of traders are long the Sterling
- The nearest resistance is around 1.4715
- Support is at 1.4668, represented by weekly R1
- 54% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: US Preliminary GDP, Reuters/Michigan Consumer Sentiment Index, Fed Chair Yellen Speech
Thursday was the worst day for the Sterling this week so far, as it edged lower against all other major currencies yesterday. Nonetheless, the losses were not as substantial as they could have been, with the largest one accounting for only 0.57% versus the Japanese Yen. The Pound also declined 0.56% against the Aussie, 0.52% versus the Euro and 0.50% against the Loonie; however, against the third commodity currency, namely the Kiwi, only a 0.21% loss was registered. At the same time, the Cable inched only 0.18% lower, despite most of US fundamentals significantly boosting the American Dollar.
British economic growth lost steam in the first quarter on the background of unexpected contraction in business investment. The second reading of Britain's first-quarter GDP figures confirmed the loss of momentum in the economic recovery. The Office of National Statistics announced that the economy grew 0.4% in the first quarter, slower than the 0.6% pace in the last three months of 2015, the same as the first estimate given in April. From a year earlier GDP expanded 2%, which was revised down from last month's first reading of 2.1%, the ONS said. Moreover, business investment missed with a fall of 0.5% against 3.2% expected. Also the BBA's mortgage approvals did not meet expectations by sliding to 40.1K against 44.8K predicted.
In addition, a separate report showed that out of the four main components on the output side of GDP, production and construction contracted from the previous quarter, while agriculture and services activity increased, according to a breakdown of the first quarter's reading. Production shrank 0.4% and construction fell by 1%, the ONS said. Manufacturing, the largest component within production, dropped 0.4%. Services, which account for a massive 79% of GDP, increased 0.6%, posting a 13th consecutive quarter of growth. The expansion was less than the fourth quarter's 0.8% pace.
US GDP Annualized and Reuters/Michigan Consumer Sentiment Index
Friday brings a number of US economic data releases, which are likely to have an impact on the Cable's performance today. First of all, the US Annualized GDP, which is released by the US Bureau of Economic Analysis and shows the monetary value of all the goods, services and structures, produced within a country in a given period of time. GDP Annualized is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. Second, the Reuters/Michigan Consumer Sentiment Index, which is a survey of personal consumer confidence in economic activity. It shows a picture of whether or not consumers are willing to spend money. The Final event is Fed Chair Yellen's Speech. As the head of the central bank, who controls short-term interest rates, she has more influence over the nation's currency value than any other person.
GBP/USD still risks breaking the down-trend
The Cable underwent the expected correction on Thursday, as supply, represented by the 22-month down-trend and the Bollinger band, was sufficient to prevent the Sterling from appreciating. However, the exchange rate was unable to fall under the nearest support, namely the weekly R1, where demand could attempt to push the price higher again today. Meanwhile, technical studies are giving mixed signals in the daily timeframe, unable to provide a clear sense of direction. The base case scenario remains a decline, with the 1.46 level being the key level to limit the losses. Nonetheless, we should not rule out the possibility of a bullish development, as fundamentals could weaken the Buck today.
Daily chart
Due to the Sterling sustaining a small loss on Thursday, the exchange rate returned under the 22-month resistance line. The Cable is likely to make another attempt at breaching it if the recently regained bullish momentum is strong enough for a rally above 1.47.
Hourly chart
Bears now in the majority
There are 57% of traders being long the Sterling today (previously 54%), while the share of sell orders inched up from 52 to 58%.
At OANDA market sentiment worsened over the day, as 53% of their open positions are short today, compared to sentiment being in a perfect equilibrium on Thursday. Meanwhile, the sentiment at SAXO Bank remained unchanged over the day, as bears take up 61% of the market for the third consecutive day.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (54%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price interval was selected by slightly less than a quarter (21%) of the voters, namely the 1.44-1.46 one, while the second most popular choice implies that the Sterling is to cost between 1.42 and 1.44 dollars in three months, chosen by 12% of the surveyed. At the same time, the mean forecast for Aug 27 is 1.4634.
Compared to previous five days, this week Dukascopy traders became more negative on US currency, as more than 60% of all votes are set to sell the Pound. In line with negative statement, the median prediction for May 31 almost crossed the 1.44 mark. The biggest part of forecasts, however, remains even below the 1.44 major level.
Once again this week Pisakjanos remains bullish on the GBP/USD currency pair, suggesting that the bullish trend is to prevail. "The bullish trend to be continued with major oscillations," he commented.
However, according to nuonrg, the Sterling is to weaken against the Buck by week's end. "The pair made a fast run into daily 200 SMA resistance area. Brexit scenario is still in play. A channel is shaping up fresher, targeting the low area of that zone," he backed his view.