- Share of buy orders jumped from 51 to 61%
- Percentage of long positions surged from 55 to 66%
- Main resistance is the weekly R1 at 1.4446
- Target is now the monthly pivot point at 1.4141
- 58% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: US Retail and Core Retail Sales (Feb), US PPI and Core PPI (Feb), US Empire State Manufacturing Index (Mar)
The Sterling showed mixed performance on Monday. While the currency gained against the riskier currencies (0.52% against the New Zealand Dollar and 0.16% against the Australian Dollar), it also gave up 0.60 and 0.56% relative to the safe havens, namely the Japanese Yen and US Dollar, respectively, even though the calendar was empty.
The number of Americans applying for unemployment benefits dropped more than expected last week, reaching the lowest level since October, signalling sustained improvement in the labour market. Jobless claims are being scrutinized for signs of labour market weakness following a recent massive stock market sell-off that resulted in a tightening in financial market conditions amid faltering global growth and concerns the world's number one economy was heading into recession. Initial claims for unemployment benefits dropped 18,000 to a seasonally adjusted 259,000 for the week ended March 5, the lowest level since mid-October, according to the Labor Department. Claims have now been below the 300,000 threshold, which is associated with healthy labour market conditions, for a year, the longest such stretch since the early 1970s. The four-week moving average of claims, considered a better measure of labour market developments as it strips out week-to-week volatility, declined 2,500 to 267,500 last week, the lowest level since late October.
So far, the labour market remains on strong footing, with nonfarm payrolls surging by 242,000 jobs in February and the unemployment rate holding at an eight-year low of 4.9%.
US data to worsen
Just as yesterday, there are no important releases concerning the United Kingdom scheduled for today. However, there will be a lot more reasons for GBP/USD to be volatile, considering the amount of data from the United States after the nooon. According to the estimates, the retail sales are to contract by 0.1% in February after they grew 0.2% a month earlier. At the same time, the analysts expect producers to cut prices by 0.2%, which creates a bearish environment for the Dollar.
GBP/USD gravitates towards 1.4140
Bullishness of the Cable that we have been observing since the beginning of March proved to be insufficient to carry the price over the monthly R1. The currency pair bounced off of 1.4446 and even closed below the 55-day SMA. The target is now the monthly pivot point at 1.4141, where the bulls will have a good opportunity to recuperate and launch a yet another attack on the weekly R1. If they are successful, the Sterling will be expected to appreciate to 1.47 dollars over the next several weeks.
Daily chart
At first GBP/USD appeared to be in a good position to rebound, considering that the pair was trading right at the lower edge of the emerging channel. However, the bias is now to the downside, as the price has just broken the support trend-line. We now expect the rate to bottom out near the latest highs and attempt to resume the recovery of this month.
Hourly chart
Sterling overbought in SWFX
There are a lot more bulls today than yesterday. The percentage of long positions surged from 55 to 66%, meaning the Pound is now overbought. As for the orders, the share of buy ones jumped from 51 to 61%.
A similar but to a lesser extent attitude is observed at OANDA, where 59% of open positions are long, two percentage point less than yesterday. On the other hand, SAXO Bank traders appear to be undecided with respect to the Cable's prospects, being that 48% of positions are long and 52% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (58%) believe the British currency is to cost 1.44 or less dollars after a three-month period. The most popular price interval was selected by 17% of the voters, namely the 1.34-1.36 one, while the second most popular choice implies that the Pound is to cost between 1.48 and 1.50 dollars in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for June 14 is 1.4225.