- Bulls still take up 55% of the market
- The 100-day SMA forms support around 1.4428
- Resistance is at 1.4478, represented by the Bollinger band
- 51% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: UK CBI Industrial Order Expectations, US New Home Sales, UK BBA Mortgage Approvals, US Durable and Core Durable Goods Orders, US Markit Services PMI, US CB Consumer Confidence, MPC Member Cunliffe Speech
Confidence of Britain remaining in the EU continued to strengthen the Sterling, resulting in relatively good performance over the weekend and last Friday. The Pound appreciated the most against the Japanese Yen (2.69%), as rumours of the BoJ implementing negative loan rates heavily weighed on the Yen on Friday. Falling oil prices allowed the British currency to post gains of 1.45% and 0.86% against commodity-based currencies, namely versus the Kiwi and the Aussie, respectively. Other notable gains were seen versus the Euro (1.17%) and the Swiss Franc (0.86%), while the GBP/USD surged only 0.56% higher. The smallest rally was detected against the third commodity currency, the Loonie, with the GBP/CAD edging only 0.03% higher, amid overwhelmingly positive Canadian CPI and Retail Sales data.
Britain's retail sales recorded their biggest monthly decrease in more than two years in March as Britons cut back on food and clothes in the latest sign households are nervous about the economic outlook. The Office for National Statistics said that the UK retail sales fell 1.3% in March compared with February, a much larger fall than expected. The volume of sales excluding auto fuel dropped 1.6% from February, the most since January 2014. The retail sales data is the latest in a series of disappointing data, coming after weak industrial production numbers and the first increase in unemployment in almost a year. Retail sales figures suggest that consumer spending, the driver of recent economic growth, weakened in March amid weak pay growth and a gloomier economic outlook.
The ONS also revealed that public-sector borrowing overshot official forecasts in the latest fiscal year and the national debt burden increased. A 4.8 billion-pound budget deficit in March left the full-year shortfall at 74 billion pounds, or 3.9% of gross domestic product. That compares with the 72.2 billion pounds projected by the Office for Budget Responsibility last month. The overshoot means George Osborne will have to find fresh savings in government spending, raise taxes or hope for quicker economic growth to reach his goal of balancing the government books by 2020.
US New Home Sales is the only potential driver today
Among important economic data releases there is only one event to have some impact on the Cable today, which is the US New Home Sales. The number of New Home Sales, released by the US Census Bureau, is an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes, so as a result the demand for goods, services and the employees is stimulated.
GBP/USD poised to begin correction
Although the Sterling was unable to maintain trade near the target area of 1.4450 on Friday, trade still closed with the GBP/USD currency pair retaking the 1.44 major level, also erasing all intraweek losses. Furthermore, the Cable opened with a bullish gap today, inching closer towards the resistance trend-line around the 1.45 mark, therefore, a correction is likely to take place. The Bollinger band is providing immediate resistance circa 1.4478, weighing on the pair, while the nearest support is represented by the 100-day SMA at 1.4428. The exchange rate, however, is expected to fall back towards the 1.44 psychological level.
Daily chart
The Cable continued to appreciate during the previous week, despite some occurring setbacks. Nevertheless, the pair edged closer to the resistance line over the weekend and is now expected to bounce back and decline towards the 200-hour SMA near the 1.43 mark. However, this trend-line is the upper border of a broadening falling wedge pattern, which usually ends with upside breakouts.
Hourly chart
Sentiment remains bullish
Traders' sentiment remains unchanged since Friday, with bulls still taking up 55% of the market.
At OANDA market sentiment is close to the equilibrium, with only 52% of their open positions being long, one percentage point less from Friday. Meanwhile, the sentiment at SAXO Bank remains bearish, with 59% of their traders holding short positions (previously 56%).
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (51%) 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 22% of the voters, namely the 1.44-1.46 one, while the second most popular choice implies that the Sterling is to cost between 1.46 and 1.48 dollars in three months, chosen by 17% of the surveyed. At the same time, the mean forecast for July 25 is 1.4243.