- The number of orders to acquire the Sterling slid even further, as only 33% are set to purchase the Pound
- Bulls are dominant again, with long positions standing at 52%
- 18% of traders still see the pair between 1.54 and 1.56 in three months
- Closest support at 1.5395, weekly PP, nearest resistance at 1.5447, represented by the monthly R1
- Upcoming events: US Annualized GDP, US Core Personal Consumption, US Pending Home Sales, Chicago Purchasing Manager's Index
The Sterling had mixed performance yesterday, as it added 0.66% versus the Euro and 0.31% against the Aussie. However, the Pound also slumped 0.51% versus the New Zealand Dollar and 0.78 against the Greenback.
The British economy grew in the fourth quarter of 2014 in line with expectations, according to the second estimate released by the Office for National Statistics. The UK GDP fell to 0.5% in the reported period, down from 0.7% in the previous three-month period. The second estimate is based on 50%-60% of available data from the expenditure and income side. The final reading is due in late March. The biggest upward catalyst on the output side of GDP was the services sector, increasing 0.8% between the third and fourth quarters. The largest drag on growth came from a weaker construction sector, which plummeted 2.1% between the two quarters. In 2014 as a whole, the UK economic output surged 2.6% from the previous year. The full-year growth reading was also left unrevised.
A separate report showed investment by businesses dropped at the sharpest pace in almost six years in the December quarter, hurt by lower investment in the petroleum sector as global oil prices continued to decline. Business investment fell 1.4% following the 1.2% drop in the third quarter, marking the second quarterly fall in a row. Measured on an annual basis, growth stood at 2.1%, the slowest since early 2010. Economists believed business investment in the UK might also be hit by uncertainty over the outcome of Britain's national elections in May.
Bank of England's Governor, Mark Carney, promised that the UK would hit the Central Bank's 2% target within two years time, which is sooner than previously forecast. He also mentioned that current period of falling prices was temporary and fundamentally distinct phenomenon from deflation.
US Preliminary GDP decline anticipated
Today the US Preliminary GDP growth is expected to weaken to 2.1%. However, the Pending Home Sales change is predicted to improve from the negative zone to 2.5%.
GBP/USD exits rising wedge
Mark Carney, Bank of England Governor, pre-warned consumers that a negative inflation rate will be temporary and the UK will not experience deflation. "Enjoy it while it lasts", he added.
On Thursday, GBP/USD tested a cluster of resistances around 1.5560 and declined earlier than anticipated. The Sterling breached the lower trend-line of the wedge, which was bolstered by the weekly R1, thus leaving the boundaries of the pattern. The pair even went below the monthly R1, before encountering support around 1.5395. The daily technical indicators are mostly pointing north, meaning the Pound is likely to rebound by the end of the day, but will most likely settle in a tight range between 1.5395 and 1.5447 amid the US data releases later on Friday.
Daily chart
On the hourly char the pair was seen rallying since the beginning of the day. However, most recently GBP/USD has started showing signs of weakness, as the resistance cluster around 1.5448 proved to be too strong to break. Technical indicators for the hourly time frame are neutral, suggesting that the fall will stop in front of the weekly PP and lower Bollinger band.
Hourly chart
Sentiment improved
Market sentiment improved, now it is bullish with 52% of positions being long. The share of buy orders slid down to 33%.
The sentiment at the SAXO Bank is net bearish, but close to neutral, as 51% of all open positions are short. OANDA traders, on the other hand, are more optimistic with respect to the Sterling, as 64% of positions are long.
Spreads (avg, pip) / Trading volume / Volatility
18% of traders still see 1.54/1.56 in three months
Traders' expectations improved a lot from the previous week, as now 57% of Community members are predicting the pair to retreat.
A proponent of a bullish scenario, Stix, said that "I predict the bullish sentiment, but I see a small pullback and a retest of the high". At the same time, Daytrader21 holds a bearish view on the pair, as he mentioned that after recent low inflation figures there is no chance that the BoE will raise rates soon and in this regard we should expect further downside pressure.