- The portion of sell orders edged down from 59 to 55%
- Market sentiment is equally divided between bulls and bears
- The 100-day SMA forms support around 1.4423
- Resistance is at 1.4520, represented by the Bollinger band, the weekly R1 and the down-trend
- 51% of traders reckon GBP/USD will be at 1.44 or higher in three months
- Upcoming events: UK BBA Mortgage Approvals, US Durable and Core Durable Goods Orders, US Markit Services PMI, US CB Consumer Confidence, MPC Member Cunliffe Speech
The Sterling traded well across the board, although gains were rather limited yesterday. The British currency gained the most against commodity-based currencies and the US Dollar, having edged 0.62% higher against the Loonie, 0.54% against the Aussie, 0.49% versus the Kiwi and 0.55% versus the American Dollar. At the same time, the GBP/CHF edged up 0.23%, while the EUR/GBP fell down only 0.11%. The Sterling also remained relatively unchanged against the Japanese Yen, having surged only 0.03%.
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 Durable and Core Durable Goods Orders, US Services PMI and US Consumer Confidence
No significant data concerning the UK economy is likely to have a serious impact on the Pound today, therefore, focus shifts towards US fundamentals, such as the Durable and Core Durable Goods Orders. The Durable Goods Orders are released by the US Census Bureau and measure the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments they are sensitive to the US economic situation. The final figure shows the state of US production activity; meanwhile, Core Durable Goods Orders exclude the transport sector. Another important event is the US Consumer Confidence, released by the Conference Board, captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion, while a low level drives to economic downturn. The final event to have an impact is the US Services PMI, released by Markit Economics, which captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in the US.
GBP/USD on the edge of breaching the down-trend
On Monday Pound's volatility was contained by the 1.44 major level from the downside and the resistance trend-line from the upside, while the day ended with a 10-pip rally. Technical studies imply another GBP/USD surge today, but that would mean a breach of the nine-month down-trend earlier than initially anticipated. Furthermore, the down-trend is reinforced by the Bollinger band and the weekly R1, while the second target rests 1.4630, represented by the weekly R2 and the monthly R1. However, in case supply around the down-trend manages to cause the Cable to reverse its bullish momentum, the 100-day SMA is then expected to provide sufficient support at 1.4423.
Daily chart
The Sterling edged lower towards the trend-line yesterday and keeps gravitating towards the down-trend today as well. Technically, the exchange rate should bounce back and begin moving towards the 200-hour SMA, unless weak US fundamentals spark more Pound-buying.
Hourly chart
Sentiment at perfect equilibrium
Market sentiment is equally divided between bulls and bears, whereas the portion of sell orders edged down from 59 to 55%.
At OANDA market sentiment is close to the equilibrium, with only 54% of their open positions being long, two percentage points more from Monday. Meanwhile, the sentiment at SAXO Bank remains bearish, with 60% of their traders holding short positions (previously 59%).
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.44 in three months
The majority of traders (51%) believe the British currency is to cost 1.44 or more 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 19% of the surveyed. At the same time, the mean forecast for July 26 is 1.4259.