- The share of purchase orders edged up from 45 to 66%
- Bears now take up 53% of the market
- The main resistance is at 1.4597
- Support is around 1.4485, represented by 20-day SMA and the weekly R1
- 64% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Retail Sales, US Philadelphia Fed Manufacturing Index, US Jobless Claims, FOMC Members Dudley and Fischer Speeches, MPC Member Vlieghe Speech
After another day the Sterling skyrocketed against most major peers, amid surprise EU referendum polls showing that the majority is voting for the ‘Bremain' camp. The Sterling appreciated the most against commodity currencies, as a stronger US Dollar drove the oil prices lower yesterday. The Pound added 2.27% against the Aussie, 2.00% versus the Kiwi and 1.91% against the Loonie. The GBP/JPY also surged 1.91%, while a 1.85% was registered against the European single currency. Since the FOMC Meeting Minutes boosted the American Dollar, the Cable gained the least, namely 0.94%.
The unemployment rate in the UK remained unchanged at a decade-low for the fifth straight month in March, though the claimant count unexpectedly declined and average earnings presented a mixed picture in comparison with forecasts. The number of people in work rose by 44,000 to 31.6 million in the three months to March compared to the previous three-month period, with increases in both full- and part-time work and the number of self-employed. Furthermore, the Office for National Statistics reported that unemployment fell by 2,000, to 1.7 million with the jobless rate holding steady at 5.1%. Data showed that the unemployment rate was last lower in 2005. Moreover, a separate research showed that the claimant count fell by a seasonally adjusted 2,400 in April, compared to expectations for a increase of 4,300 people, and following an advance of 14,700 a month earlier, when the figure was revised from a previously reported gain of 6.700. The upward revision in the claimant count was the biggest monthly rise since September 2011.
Meanwhile, the average earnings index, including bonuses, rose by a seasonally adjusted 2.0% in the three months to March, above forecasts for a 1.7% increase and after rising by a revised 1.8% in the three months to February.
UK Retail Sales, Philly Fed Manufacturing Index and the US Jobless Claims
From the UK side there is only one event that could have some impact on the Cable today, namely the Retail Sales data release. The Retail Sales are released by the National Statistics and 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. From the US side, however, the Philadelphia Fed Manufacturing Index is due, which is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of the ISM Index. Finally, the Initial Jobless Claims; they are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labour market. A larger than expected number indicates weakness in the market, which influences the strength and direction of the US economy.
GBP/USD struggles to reclaim 1.46
Still being driven by political factors, namely the upcoming EU referendum, the Sterling managed to advance more than 130 pips against the US Dollar yesterday. The weekly R2 succeeded in limiting the gains just on top of the 1.46 major level, which could cause the Cable to undergo a corrective decline. In this case the 20-day SMA and the weekly R1 cluster will be the key support. Technical studies are in favour of the bearish outcome, but a possibility of the GBP/USD currency pair soaring in the wake of positive political or fundamental news exists, which would lead the exchange rate towards the resistance circa 1.4670, namely the Bollinger band and the weekly R3.
Daily chart
With the unexpected strong rally on Wednesday, the GBP/USD currency pair opened the door for more appreciation, with a chance of the down-trend getting retested again. Overall, the Cable has been rebounding since the beginning of April, thus, even a downside correction will not yet reverse that trend.
Hourly chart
Bears now in the majority
Bears are now in the majority, taking up 53% of the market (previously 48%), whereas the share of purchase orders edged up from 45 to 66%.
At OANDA market sentiment worsened over the day, as 51% of their open positions are now long, compared to 56% on Wednesday. Meanwhile, the sentiment at SAXO Bank remained unchanged, as bears still take up 56% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (64%) 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 either between 1.42 and 1.44 dollars or between 1.38 and 1.40 dollars in three months, both chosen by 12% of the surveyed. At the same time, the mean forecast for Aug 19 is 1.4535.
Nevertheless, market sentiment among respondents is purely bearish, with almost 67% of Community members saying the pair will continue moving to the south later this week.
Pisakjanos said that he is expecting a support at 1.43 level. "Probably then the pair will return to bullish scenario," he commented.
Meanwhile, Likerty believes that the Cable is to edge lower by week's end. However, he still stated that "similarly to the EUR/USD, Pound has potential for bullish correction 1.4420."