- The percentage of buy orders placed 50 pips from the spot went up from 51 to 66%
- GBP/USD trapped between 1.555 and 1.550
- GBP/USD is approaching the apex of the falling wedge pattern
- Upcoming events: US Initial Jobless Claims, Chicago PMI, Pending Home Sales
Britain's house prices continue to ease in December amid signs of the housing market cooling from the previous record levels, according to Nationwide Building Society. Across the UK, property prices rose 7.2% on annual basis in December to 188,559 pounds on average, edging slightly lower than a historic high of 189,388 pounds recorded in November. This was the fourth straight month of slower annual house price inflation. When measured on a monthly basis, average asking prices of properties decelerated to an increase by 0.2%, compared with 0.3% measured in the previous month and in line with estimates. Nationwide expects the housing market to regain momentum next year, if the UK economy continues to grow as expected. London was named as the UK's "top performer" for price growth in 2014, with prices soaring 17.8% reaching 406,730 pounds.
Rightmove reported similar price movement for December, when average price of property in the country dropped by a record 3.3%, which slowed the annual price growth to a rise of 7%, down from 8.5% in the previous month. Despite the monthly record drop, Rightmove projected that house prices would continue to increase in 2015 by an average of 4% to 5%, driven by a shortage of new property in the market, and increased buyer sentiment amid a continuing low interest rate environment.
US labour market temporary to become the main factor for GBP/USD
Today's numbers are not expected to show improvement in the labour market of the United States - the amount of people seeking jobless benefits is estimated to increase from 280 to 290K. The UK fundamentals for now are quiet - the next notable release concerning the well-being of the major European economy will be published on Jan 2, when Markit is scheduled to reveal the tendencies in the manufacturing sector.
GBP/USD oscillates between 1.555 and 1.550
Simon Smith, Chief Economist at FXPro, advises not overestiment bullish potential of the US Dollar. According to him, "we will see Dollar strength through the year, but it's going to be a very difficult year in terms of trends".
Jean-Francois Owczarczak, the director of Fingraphs.com, says "the Cable has been correcting strongly", and notes that "it's not an impulsive move yet, but could become such if it [GBP/USD] were to move below 1.55. According to him, there's an important support we're approaching. If it is violated, it could "open more potential to the downside".
Daily chart
For the time being the currency pair remains trapped between the weekly pivot at 1.5567 and a cluster of supports at 1.55. Considering GBP/USD has been forming a falling wedge pattern over the last 6-7 months, we should be wary of a possible break-out to the upside. In case the upper boundary is breached, the Sterling will most likely keep moving north until it hits the resistance at 1.5760, where the monthly PP merges with the 55-day SMA.
Hourly chart
Increase in buy orders signals approaching resistance
The sentiment in the SWFX marketplace remains remarkably stable — 58% of open positions are still long. Bullish expectations of the market are also confirmed by other participants, such as OANDA (56%) and by SAXO Bank (57%), though it must be noted the advantage of longs over the shorts is rather fragile and can be negated within a day.
The distribution between the buy and sell orders, unlike the open positions, is constantly changing — the percentage of the former placed 50 pips from the spot went up from 51 to 66%, meaning we may be closing in on a significant resistance.
Spreads (avg, pip) / Trading volume / Volatility
Pound to stabilise at 1.5850
A separate survey, which collects the views of the most active FX Community members, reveals presence of a negative bias towards the British Pound this week. Almost a fourth of all participants expects GBP/USD to keep falling down to the 1.553/45 interval. However, the second most popular range was 1.560/53 chosen by 21% of traders.