- There are now 52% of orders to purchase the British Pound
- 53% of all open positions are long
- Main resistance is the weekly R1 at 1.4393
- The nearest supports are the weekly PP, the 20 and the 55-day SMAs around 1.4250
- 55% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: UK Current Account, UK Final GDP, UK Net Lending to Individuals, UK Mortgage Approvals, US Jobless Claims, Chicago PMI, FOMC Member Dudley Speech
Momentum has changed for the British Pound, as it suffered losses against all other major currencies on Wednesday. With the continued increase in oil prices, the largest losses were registered against commodity-currencies, namely 1.07% versus the Kiwi, 0.87% versus the Loonie and 0.62% against the Aussie. The Sterling also dropped notable against the European single currency (0.45%), while the smallest decline of 0.04% was detected against the American Dollar, amid US fundamentals beating expectations.
The UK consumer confidence declined to the lowest level in more than a year amid fears that Britain might vote to exit the European Union. GfK's consumer-confidence index was at zero in March. A measure of expectations for the economic situation over the next 12 months was minus 12, remaining unchanged on the month and plummeting 18 points from a year earlier. However, consumers were more optimistic about their personal finances. A separate indicator of confidence produced by pollsters YouGov and the Centre of Economics and Business Research levelled off. It came in at 113 in March, up slightly from 112.9 the month before. While consumers are still sanguine on house prices, anticipating them to go up, YouGov's data showed they are more downbeat on business activity in their workplace over the next year. Economists say the government's decision to hold the EU referendum is another, home-grown, threat which is likely to undermine confidence in the run-up to the vote on June 23. If voters decide to leave the EU, Britain is likely to suffer a hit to growth, at least in the short term, most economists predict.
The Bank of England said earlier in the week that the prospects for financial stability have worsened as it put the risk of a Brexit at the top of its list of near-term domestic threats.
UK Current Account, UK Final GDP and Chicago PMI
Important economic data concerning the UK is scheduled to be released today, namely the UK Current Account and the Final GDP. The UK current Account is released by the Office for National Statistics. It shows the difference in value between imported and exported goods and services during the preceding quarter. This data, however, is likely to have no impact, as it is the duplicate of the monthly Trade Balance figures. On the other hand, it is linked to currency demand and can be important for Forex traders. The Final GDP shows the change in inflation-adjusted value of goods and services. However, this is the final release, therefore, the impact is also likely to be limited. Finally, the UK Net Lending to Individuals, released by the Bank of England, is a monthly measure of growth rates, amounts outstanding and changes in total lending to individuals, divided into lending secured on dwellings and consumer credit. It shows a picture of whether or not consumers are willing to spend money. Furthermore, there is data concerning the US later today. First of all, the Chicago Purchasing Managers Index, released by ISM-Chicago, Inc, captures business conditions across Illinois, Indiana and Michigan. This index is an indicator of business trends and it is interrelated with the ISM manufacturing Index. It is widely used to indicate the overall economic condition in US.
GBP/USD on the edge of falling under 1.43
Upon putting the monthly R1 to the test, the GBP/USD currency pair failed to maintain gains and retreated, closing below the 1.44 level. The Supply, represented by the weekly R1, at 1.4393 proved to be sufficient to keep the Sterling from appreciating against the Buck, thus, another bearish development today is likely. The nearest support is located around 1.4250 in face of the weekly PP, the 20 and the 55-day SMAs. However, there is still a possibility of the Cable rising higher today on positive fundamental data, with the ceiling being the 1.45 psychological level, as it kept the pair at bay for more than a month.
Daily chart
The Cable experienced a setback on Wednesday and failed to continue appreciating. The pair now risks falling to 1.4250, where the 200-hour SMA is expected to provide sufficient support for a rebound and, therefore, extend the recovery towards the Feb high.
Hourly chart
Sentiment turns bearish
Market sentiment once again shifted to the bullish side, but remains close to equilibrium, with 53% of all open positions being long. There are now 52% of orders to purchase the British Pound (previously 43%).
Concerning the sentiment of other market participants, OANDA still has a bullish sentiment of 61%, compared to 62% on Tuesday, opposed to our now bearish sentiment. Meanwhile, the sentiment at Saxo Bank reached a perfect equilibrium today, with bears just slightly outnumbering the bulls.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (55%) 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 18% of the voters, namely the 1.38-1.40 one, while the second most popular choice implies that the Pound is to cost between 1.46 and 1.48 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for July 01 is 1.4278.
Community members do not expect any surprises from the currency pair this week, as according to the Dukascopy survey the Sterling might end the week at 1.41, slightly changed from the last week's closing price. The majority of those polled (53%) share a bearish outlook for the UK currency.
Among the traders with a positive outlook towards the GBP/USD currency pair, Jignesh commented that the Cable here can be tricky. "The pair is bouncing off major monthly and yearly support levels from 1.38 and looks bullish from there, but at the same time recently made a strong breakdown of a 4h up channel indicating bearish pressure," he backed his view. Jignesh also added that "Brexit fundamentals continue to put pressure on the pair. Expecting a volatile week ahead, with a slight bullish bias as a result of a weak USD."
At the same time, Besim, a trader with a bearish perspective towards the Cable, mentioned that "the GBP/USD continued to decline as the greenback gained. The Fed inspired rally as well as terrorism in Europe weakened the pound as it increased the possibility of Brexit over immigration issues. The pound is trading at 1.4114" in support of his outlook.