- The share of sell orders take up 71% of the market
- 51% of all open positions are now short
- The target resistance is around 1.4482
- Support is around 1.4340, represented by the 55 and the 100-day SMAs
- 62% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK CPI, UK PPI, UK RPI, US Building Permits, US CPI and Core CPI, US Housing Starts, US Capacity Utilization Rate, US Industrial Production
Hopes of the UK remaining in Europe provided support for the British currency on Monday, helping it outperform most major peers. The Sterling gained the most against the Japanese Yen and the Swiss Franc, adding 0.62% and 0.49%, respectively. At the same time, mild gains were registered versus the US Dollar (0.26%), the Euro (0.16%) and against the Aussie (0.04%). However, against the remaining commodity currencies, namely the Kiwi and the Loonie, the Pound suffered a 0.07% and 0.08% loss, respectively, amid an increase in oil prices.
Official data showed that the New York Federal Reserve's index of manufacturing conditions contracted for the first time in three months in May, as new orders and shipments turned negative. The general business conditions index fell to -9 in May, contrary to analysts' prediction of a modest pullback to 6.5 points from April's 9.56 points. The previous reading had been the indicator's highest since January 2015. The figures suggest that factories in the state continue to struggle despite growth in March and April. Factory output nationwide has been sluggish in the past year as a weak global economy has lowered exports and US businesses are spending less on equipment and machinery. The new orders and shipments indexes also pointed to a decline in both orders and shipments. A measure of new orders fell to –5.5, from 11.1 the previous month. Also, a gauge of shipments slipped into negative territory, falling to minus 1.9 from 10.2. Moreover, employment levels appeared to be little changed, while the average workweek index pointed to a decline in hours worked.
Thus, the so-called Empire State index suggests that the recovery from the US manufacturing recession will be sluggish at best. The average for the second quarter thus far, at 0.27 points, is slightly better than the -11.8 points logged in the first quarter.
UK CPI and PPI Input, US CPI and Building Permits
Tuesday is rich in terms of fundamental data releases, starting with UK inflation figures. The most important one is the UK CPI, which is released by the National Statistics and is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Second, the UK PPI Input, which is a monthly measure of the rate of inflation experienced by the UK manufactures when buying goods and services. It captures changes in the average price of a fixed basket of goods and services purchased by the UK manufactures. US Inflation data, namely the CPI and the Core CPI, is also due later today, which is likely to have the most impact. Furthermore, the US Building Permits, released by the US Census Bureau, show the number of permits for new construction projects. It implies the movement of corporate investments (US economic development). It also tends to cause some volatility to the USD.
GBP/USD attempts to retake 1.45
Demand, represented by the 100-day SMA, was sufficient yesterday to trigger a rebound, but with the 1.44 major level barely retaken. The GBP/USD pair remains driven by concerns of the upcoming EU referendum, and increasing support of ‘Bremain' keeps providing the pair with more strength. Technically, the Cable has the potential to reclaim the 1.45 mark, unless the second resistance area around 1.4482 limits the gains. On the other hand, technical indicators retain mixed signals, suggesting that more positive US fundamentals could cause the Sterling to retreat from intraday gains and fall back under 1.44.
Daily chart
The 200-hour SMA failed to keep the Cable from appreciating further. The pair is now attempting to retake the 1.45 mark, with another potential resistance located around 1.4530/40, as the Sterling struggled to rise above this area previously.
Hourly chart
Bears now in the majority
Market sentiment shifted to the bearish side, as 51% of all open positions are now short, compared to 43% on Monday. The share of sell orders keeps growing; they now take up 71% of the market.
At OANDA market sentiment weakened over the weekend, as 53% of their open positions are long, and the remaining 47% are short. Meanwhile, the sentiment at SAXO Bank broke out of the equilibrium, with bears now in the majority, taking up 57% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (62%) believe the British currency is to cost 1.46 or less dollars after a three-month period. The most popular price interval was selected by more than a quarter (29%) of the voters, namely the 1.44-1.46 one, while the second most popular choice implies that the Sterling is to cost between 1.40 and 1.42 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for Aug 17 is 1.4547.