- 54% of all pending orders are to buy the Pound
- 54% of all open positions are long
- Gains should be capped around 1.27
- Significant support rests circa 1.2624
-
Upcoming Events: UK Public Sector Net Borrowing, US Existing Home Sales, US Crude Oil Inventories
The Bank of England Governor Mark Carney delivered a speech on Tuesday at the Mansion House dinner in London. The Governor said that the potential movement of the Euro-clearing centre from London to another EU-based city amid Britain's withdrawal from the European Union would likely lead to higher costs for participants and do little for the region's financial stability. Last week the European Commission proposed to move all Euro-clearing businesses away from London after the UK leaves the EU in 2019.
The European Commission said that the following step would likely sustain financial stability in the region. In the meantime, Carney urged the EU to develop together a new form of cross-border supervisory cooperation, highlighting the high importance of free trade in financial services. Apart from that, the Governor stated that policymakers would proceed tolerating the inflation rate above the 2% target "to see the extent to which weaker consumption growth is offset by other components of demand" and assess both wage and economic growth and, thus, leave interest rates on hold.
Watch More: Dukascopy TV
Another quiet day
Wednesday also does not bring a lot of data to focus on. From the UK side the Public Sector Net Borrowing is due. However, it is likely to have a very limited impact on the British Pound, thus, more attention turns to the US Existing Home Sales, as those provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD.
Read More: Fundamental Analysis
GBP/USD attempts to recover from Tuesday's losses
Severe bearish momentum on Tuesday caused the GBP/USD currency pair to pierce the ascending channel's support line, with the support around 1.2624 limiting the losses. Due to the strong demand at this area, the Sterling has the opportunity to erase some of yesterday's losses, despite technical indicators in the shorter timeframes suggesting otherwise. The RSI specifically both in short and medium terms approached its bottom turnaround point, which implies a recovery could be due. Intraday gains should then be capped around 1.2720, where a relatively tough resistance on the hourly chart rests. On the other hand, in case more bearish momentum persists and the monthly S2 fails to hold the pair, the 1.2560 mark is the area to consider as another potential support.
Hourly chart
On the daily chart the Cable is seen sliding down for five consecutive weeks now, even though the bearish trend is not strongly expressed. A failure to hold above the monthly S2 is likely to result in a drop towards the 1.25 mark, before another strong recovery takes place. The 1.2550/60 area could also be a potential support, as the 200-day SMA rests there.Daily chart
Read More: Technical Analysis/
Traders remain neutral
Market sentiment turned neutral today, as 54% of all open positions are long. At the same time, there are 54% of all pending orders set to purchase the British Pound.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 54% of all open positions are short and the remaining 46% are long. Meanwhile, sentiment at Saxo Bank is neutral, with 52% of traders now being short and the other 48% - long on the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders see Pound recovering
© Dukascopy Bank SATraders believe the Cable is to fall below the 1.28 major level by the end of the next three months, as 51% of survey participants share this belief. While the current price is around 1.2650, the average forecast for September 21 is 1.2793. The 1.24-1.26 range is now the most popular price interval, having 20% of the votes, while on the second place is the 1.20-1.22 interval, with 16% of the voters choosing it.