- The share of sell orders takes up 63% of the market
- 57% of traders are long the Sterling today
- The weekly and the monthly PPs form resistance around 1.4420
- Support is around 1.4335, represented by the 55 and the 100-day SMAs
- 62% of traders reckon GBP/USD will be at 1.44 or lower in three months
- Upcoming events: US Empire State Manufacturing Index, US NAHB Housing Market Index, UK CPI, UK PPI, UK RPI, US Building Permits, US CPI and Core CPI, US Housing Starts, US Capacity Utilization Rate, US Industrial Production
The Sterling failed to outperform other major currencies on Friday and over the weekend, with rather sharp losses detected against the Yen and the US Dollar. The safe-haven Yen added 0.94% against the British Pound, while positive US Retail Sales data caused the Cable to drop 0.60%. At the same time, the Sterling remained relatively unchanged against the Swiss Franc, having fallen 0.09% against it. Gains, however, were registered versus the commodity-linked currencies, namely 0.17% against the Kiwi, 0.12% versus both the Aussie and the Loonie. At the same time, the Pound remained completely unchanged against the European single currency.
he Governor of the Bank of England strongly defended his warning last week that a vote to leave the European Union in June could push Britain into recession. Mark Carney faced calls for his resignation, with Conservative MPs accusing him of interfering into politics, after the bank's Monetary Policy Committee warned of slower growth and higher inflation if Britons vote for a ‘Brexit' in the key referendum on June 23. The BoE was criticised for providing a one-sided analysis. However, Carney insisted he was not entering into the wider referendum debate but that the central bank had a duty to explain its thinking and potential risks to the economy. Carney said the BoE's job of ensuring financial stability and steering inflation back to its 2% target required the bank to be honest about short-term economic risks, such as a vote to leave the EU, that could hamper reaching these goals. Prime Minister David Cameron and the leaders of Britain's other main political parties, as well as international bodies such as the IMF, all support Britain staying in the EU.
Meanwhile, Britain's output in the construction sector dived 3.6% on a month-on-month basis in March, more than expected and further down from the fall of 0.9% a month before, according to the Office for National Statistics.
NAHB Housing Market Index and the Empire State Manufacturing Index
Monday is rather quiet in terms fundamental data releases, with the main accent being on the US data, such as the Empire State Manufacturing Index and the NAHB Housing Market Index. The NAHB Housing Market Index is released by the National Association of Home Builders. It represents home sales and expected home buildings in the future indicating housing market trend in the United States. The growth rate of the housing market affects the USD volatility at some rate. At the same time, the Empire State Manufacturing Index, which is conducted by the Federal Reserve Bank of New York, gauges business conditions for New York manufacturers. Generally speaking, a positive result is bullish for the US Dollar, while a negative result shows poor growth of US Dollar.
GBP/USD to undergo a correction
A set of positive US fundamentals caused the British Pound to plunge against the US Dollar on Friday, with the 100-day SMA managing to limit the losses. The given SMA is also providing strong support today, where demand could be sufficient to cause a corrective rally. The Cable would then be facing a resistance cluster around 1.4420, represented by the weekly and the monthly PPs, but a surge back above the 1.44 major level will be hard to achieve due to lack of impetus today. Furthermore, technical indicators are giving mixed signals, implying that the bullish momentum could be short-lived and more weakness might soon follow.
Daily chart
Friday's slump caused the Sterling to return within the borders of the descending channel pattern, but its upper border is unlikely to keep the volatility contained. The 200-hour SMA is the upper floor, unless bears manage to push the Cable towards the support line around 1.4260 much earlier.
Hourly chart
Bulls now in the majority
There are 57% of traders being long the Sterling (previously 60%), while the share of sell orders keeps rising, now taking up 63% of the market.
At OANDA market sentiment weakened over the weekend, as 51% of their open positions are long, and the remaining 49% are short. Meanwhile, the sentiment at SAXO Bank is quite similar to the OANDA's, as bulls and bears are now in a perfect equilibrium.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.44 in three months
The majority of traders (62%) 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 more than a quarter (30%) of the voters, namely the 1.44-1.46 one, while the second most popular choice implies that the Sterling is to cost between 1.38 and 1.40 dollars in three months, chosen by 12% of the surveyed. At the same time, the mean forecast for Aug 16 is 1.4547.