- The number of orders to acquire the British currency increased from 58 to 59%
- Market sentiment remains bullish at 63%
- Main resistance is the monthly PP at 1.4141
- The nearest support are the weekly S1 and the Bollinger band around 1.3977
- 54% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: US Core PCE Price Index, US Goods Trade Balance, US Personal Spending and Income, US Pending Home Sales
The Sterling's performance on Friday and over the weekend was mixed, with the Pound mainly appreciating against commodity-based currencies. The Pound suffered the most against the US Dollar, namely 0.15%, followed by even lesser declines of 0.08% against the Euro and 0.05% versus the Yen. Gains of 0.14% and 0.10% were seen against the Aussie and the Kiwi, respectively, while the British currency remained relatively unchanged against the Swissie, surging 0.04%, and the Loonie, inching 0.02% lower.
The UK retail sales declined less than expected in February after increasing the most in more than two years in January due to post-Christmas sales. Retail sales volumes fell 0.4% last month following the 2.3% surge in January, according to the Office for National Statistics. Economists, however, had predicted a 0.7% decline. Compared with a year earlier, sales in February soared 3.8%, slowing from a growth rate of 5.4% in January.
British consumer demand has been sturdy and has supported economic growth over the past couple of years, boosted by record employment, modestly increasing wages and near-zero inflation, all of which have provided households with more disposable income. Last month the BoE predicted household consumption would increase by 2.75% this year, the same as in 2015 and faster than the economy as a whole would expand. However, there have been some signs of a slowdown. Figures from the British Retail Consortium showed annual growth in retail spending decreased to 1.1% in February from 3.3% in the prior month. Moreover, ONS figures showed the value of retail sales rose by 1.4% on the year in February. The ONS said sales in the three months to February had suffered due to the steepest decline in clothing sales since December 1990, which plunged by 3.4%.
US Core PCE Price Index, US Core Personal Spending and Income, US Pending Home Sales
There are no important economic data releases from the UK, but despite that, this Monday is not as quiet as the previous few, as a number of US fundamentals are scheduled for today. First of all, the Core Personal Consumption Expenditure, released by the US Bureau of Economic Analysis, is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products such as food and energy in order to capture an accurate calculation of the expenditure. It is a significant indicator of inflation. Second, personal spending and income, both released by Bureau of Economic Analysis, Department of Commerce. The personal spending measures purchases of goods and services by households and by nonprofit institutions that serve households from private business. The personal income measures the total income received by individuals, from all sources including wages and salaries, interest, dividends, rent, workers' compensation, proprietors' earnings, and transfer payments. This figure can provide insight on the US employment situation. Finally, the Pending Home Sales, released by the National Association of Realtors, is a leading indicator of trends of the housing market in the US It captures residential housing contract activity of existing single-family homes. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD.
GBP/USD sets eye on 1.42
The British Pound remained almost completely unchanged against the US Dollar on Friday, with the monthly PP limiting the losses at 1.4141. However, due to a bearish gap today, trade opened below this mark. Consequently, the monthly PP is now providing immediate resistance, while the second target is located around 1.4250, represented by the weekly PP, the 20 and the 55-day SMAs. Meanwhile, the weekly S1 and the Bollinger band form a support cluster around 1.3977, as a possibility of a bearish development exists, amid technical studies in the medium and longer timeframes remaining bearish.
Daily chart
The Cable's performance on Friday was surprisingly good, even causing the pair to break through the descending channel's resistance line. The GBP/USD currency pair is now consolidating between 1.4120 and 1.4160, but the bearish development and, thus, a slump under 1.41 is still possible. The 200-hour SMA circa 1.4254 is likely to keep the Sterling from appreciating if bulls manage to take over the market.
Hourly chart
Sentiment turns bearish
Market sentiment remains bullish at 63%, compared to 62% on Friday. At the same time, the number of orders to acquire the British currency increased from 58 to 59%.
A similar but to a lesser extent attitude is observed at OANDA, where 63% of open positions are long, one percentage points more than on Friday. Meanwhile, the sentiment at Saxo Bank remains bullish, but a slightly stronger than on Friday, being that 53% of all open positions are now long and the remaining 47% are short.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (54%) 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 16% of the voters, namely the 1.38-1.40 one, while the second most popular choice implies that the Pound is to cost between 1.34 and 1.36 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for June 28 is 1.4296.