- The share of purchase orders inched up from 58 to 60%
- Market sentiment remains bullish at 61%
- Main resistance is around 1.4285
- The nearest support is represented by the monthly PP, the 20 and the 55-day SMAs around 1.4260
- 53% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: US Retail and Core Retail Sales, US PPI and Core PPI, UK CB Leading Index, US Crude Oil Inventories, US Beige Book
The Sterling experienced mixed performance over the last 24 hours, as it appreciated against some major peers, but also declined against the others. The Pound added the most versus the Japanese Yen, namely 0.81%, followed by 0.43% gain versus the Euro, 0.36% versus the Swissie and 0.25% against the US Dollar. At the same time, rather solid losses were registered against commodity-based currencies, triggered by an increase in oil prices. The British currency lost 0.90%, 0.83% and 0.70% against the Aussie, the Loonie and the Kiwi, respectively.
UK consumer price inflation jumped to 15-month high, rising to 0.5% from previous 0.3% this month, according to the Office for National Statistics. The reason for such an increase was a rise in the cost of air fares over Easter and more expensive spring and summer clothing ranges hitting stores. Air fares advanced 22.9% month-on-month this March, compared with increase of 2.7% in March 2015. Meanwhile, City analysts were surprised to see such a data release, since they had expected inflation to stay near zero or climb to 0.4%. However, other analysts emphasised that the longest periods of low inflation in a generation is likely to come to an end over the coming months, since higher petrol and import prices along with the rising average wages from the low Pound fed into the figures.
In addition to that, an unexpected increase in the UK CPI is likely to effect on the Bank of England's decision on its monetary policy. The central bank is widely expected to keep its policy rate unchanged at 0.5% on Thursday's monetary meeting, but some analysts say the recent firming of inflation is laying the groundwork for tightening in the months ahead. In the meantime, very important data on core inflation performance showed the measure rose to 1.5% in annual terms. This increase is to further put a pressure on the BoE policy monetary policy decision.
US Retail and Core Retail Sales, US Beige Book
Today important economic data releases concern the US economy and, therefore, should have an impact on the US Dollar. First of all, the US Retail Sales, released by the US Census Bureau, measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. At the same time the Core Retail Sales are due, but they exclude the automobile sector. Another event is the US Beige Book. The Beige Book reports on the current US economic situation. Through interviews with key business contacts, economists, market experts, and other sources are gathered by each of the 12 Federal Reserve Districts. The survey gives a picture of the overall US economic growth.
GBP/USD takes a crack at the down-trend
The Cable edged higher on Tuesday, but with gains being limited due to mixed fundamental data results and the four-week down-trend playing its part. There is no room for another rally today, unless supply at the mentioned resistance line is insufficient to cause the GBP/USD currency pair to make a U-turn. In case bears take over the market, we should see a decline towards second support area, namely the weekly PP at 1.4151. On the other hand, a failure to push the pair lower will result in a retake of the 1.43 psychological level, despite it being bolstered by the weekly R1. The second resistance, however, lies out of reach around 1.4480.
Daily chart
Ever since the GBP/USD currency pair edged over the 200-hour SMA, this moving average has been acting as a rather solid support. The pair appears to be struggling to prolong its post-wedge rally, thus, risks of a fall below the 200-hour SMA persist.
Hourly chart
Sentiment remains bullish
Market sentiment remains bullish at 61%, compared to 64% previously. The share of purchase orders inched up from 58 to 60%.
Concerning the sentiment of other market participants, OANDA has a positive outlook towards the Cable, as 55% of their open positions are long, compared to 61% on Tuesday. Meanwhile, the sentiment at Saxo Bank broke out of the equilibrium, with 54% of all open positions now being short and the remaining 46% being long.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (53%) 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 1.46-1.48 ones, while the second most popular choice implies that the Pound is to cost between 1.38 and 1.40 dollars in three months, chosen by 15% of the surveyed. At the same time, the mean forecast for July 13 is 1.4265.
This week the sentiment changed a little, as the same number of our weekly quiz participants expect the pair either to gain value or to decline. The average forecast for the end of the current week slightly went up, namely to 1.415.
Likerty, a member of the Dukascopy Community, shared his view on the GBP/USD pair's performance. "I suppose the Pound has the most bullish potential against US Dollar (of all majors)," he commented.
At the same time, Jignesh said that even though it is quite likely that Brexit fears are exaggerated, the market continues to put pressure on the GBP. "Last week the pair pierced through major support at 1.4050 and took stops with it. The downside here continues to be supported by the monthly bullish engulfing candle, though this is likely to be the last week the pair will look to be bid as the brief bullish sentiment of May continues to negate over time," he added.