- The number of sell orders surged from 51 to 55%
- 52% of traders now short the Pound
- The nearest resistance is around 1.45
- Support is at 1.4430, represented by monthly PP
- 58% of traders reckon GBP/USD will be at 1.46 or lower in three months
- Upcoming events: UK Public Sector Net Borrowing, UK Inflation Report Hearings, US New Home Sales
The British Pound began the week with rather poor performance, as it sustained losses against most major peers on Monday. Risk aversion kept strengthening the Japanese Yen, causing the GBP/JPY pair to edge 1.00% lower. Other somewhat notable losses of 0.29% and 0.22% were registered against the Swiss Franc and the Aussie, respectively, whereas the Sterling also dropped 0.12% lower versus both the Kiwi and the Greenback. The British currency suffered the least against the Euro, having edged only 0.10% lower, but the only currency it was able to outperform was the Loonie, adding 0.13% against it.
Business activity in the US manufacturing sector continued to decline in May with new orders increasing at the slowest rate so far this year, as manufacturers have been hit hard by a stronger US Dollar and tepid global demand. Markit's preliminary manufacturing PMI eased to 50.5 this month, down from 50.8 in April, when it logged the worst performance since September 2009. The gauge remained well below the post-crisis average of 54.1. A renewed decline in production was one key factor weighing on the headline index in May, alongside softer new order growth and further cuts to stocks of inputs.
The data comes at a time when the whole sector has been facing stark headwinds blowing from Greenback's appreciation, a slowing China's economy, and a volatile stock market. Furthermore, lower oil prices have hit manufacturers tied to the energy industry, undermining burgeoning domestic production, lowering demand for steel and drilling equipment and other manufactured products used in the industry. Nevertheless, last week the US Federal Reserve increased expectations for a June interest rate hike by saying the market was not taking the possibility of a hike seriously enough, according to the minutes of its latest policy meeting.
UK Public Sector Net Borrowing and US New Home Sales
Today's attention should be paid to the UK Public Sector Net borrowing, which is the difference in value between spending and income for public corporations, the central and local governments during the preceding month. It is released by the Office for National Statistics once a month, where a positive number indicators a budget deficit, while a negative one – a surplus. Later today the US New Home Sales are due. They are released by the US Census Bureau and are 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 attempts to regain the bullish momentum
The Cable was rather volatile on Monday, but ended the day in the red zone with a 21-pip loss. The weekly PP and the 20-day SMA are now providing immediate resistance for the GBP/USD currency pair, located on top of the 1.45 psychological level. However, according to technical indicators the Sterling is to outperform the Buck, as they are now giving bullish signals in the daily timeframe. The bullish momentum could be sparked by today's UK inflation report, but, nonetheless, the 1.46 mark is expected to remain intact. In case bears prevail, a drop below 1.44 is doubtful, as the three-month up-trend there is likely to provide sufficient support to limit the losses.
Daily chart
The 200-hour SMA somewhat failed to prevent the Cable from declining yesterday, but the exchange rate still keeps gravitating towards the 1.45 mark. Technically, the GBP/USD pair should rebound today, preserving the current short-term bullish trend.
Hourly chart
Bears now in the majority
There are 52% of traders now short the Pound, compared to 54% on Monday. The number of sell orders, however, surged from 51 to 55%.
At OANDA market sentiment worsened over the day, as 51% of their open positions are now short, compared to 52% on Monday. Meanwhile, the sentiment at SAXO Bank slightly improved, as bears now take up 53% of the market, compared to 55% yesterday.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months
The majority of traders (58%) 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 exactly a quarter (25%) of the voters, namely the 1.44-1.46 one, while the second most popular choice implies that the Sterling is to cost between 1.42 and 1.44 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for Aug 24 is 1.4594.