- The share of buy orders slid from 57 to 51%
- Bulls take up 63% of the market
- The nearest resistance is located at 1.4288
- The Bollinger band forms support circa 1.4258
- 56% of traders reckon GBP/USD will be at 1.46 or higher in three months
- Upcoming events: UK CB Leading Index, UK CPI, UK PPI, UK RPI, US Retail and Core Retail Sales, US Import Prices
The British currency suffered heavy losses against all other major currencies on Friday and over the weekend, amid a ‘Brexit' poll published on Friday. The Sterling declined the most against the Japanese Yen, the US Dollar and the Swiss Franc, having plunged 1.48%, 1.39% and 1.34% against them, respectively. At the same time, the Pound edged 0.91% lower against the Loonie, 0.81% versus the Euro, 0.71% versus the Kiwi and 0.63% against the Australian Dollar.
Manufacturing production in the UK advanced further bolstering optimism about the domestic economy. UK manufacturing as well as industrial production data outperformed major economists' expectations in April being mainly influenced by the weaker cable due to upcoming Britain's EU referendum. According to the latest figures released by the Office of National Statistics, manufacturing production skyrocketed 2.3%, against March's 0.1%, and an expected growth of 0%. Industrial production, in turn, jumped by 2% in April, adding 0.3% from March, and far above the 0% reading expected. On a yearly pace, manufacturing production added 0.8%, showing much better results than a forecasts for a 1.5% decline as well as after a steep 1.9% drop in March. Concerning industrial production, this data demonstrated an increase of 2.0% following a gain of 0.3% in the preceding month and in line with forecasts.
Meanwhile, analysts warned that despite such a positive figures which provided a strong boost to the economy, it was still too early to say whether the industrial sector had totally strengthened. Moreover, following data spurred the pound, which currently is suffering upcoming Brexit poll's results.
Another quiet Monday
There are no significant events today that could have a solid impact on the GBP/USD currency pair, but tomorrow the UK inflation data is due, such as the CPI. The CPI 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. From the US side the Retail and Core Retail Sales are due. They 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. The Core Retail sales, however, exclude the automobile sector.
GBP/USD remains subject to weakness
The Sterling was unable to preserve the ascending channel pattern last Friday, as it unexpectedly dropped more than 275 pips against the US Dollar, with the decline triggered by the ‘Brexit' polls, showing that majority was voting to leave the EU. With the referendum closing in, the pair remains weak and is likely to suffer another decline today. Demand at the closest support, namely the lower Bollinger band, is insufficient to limit today's losses, whereas the second target lies just under the 1.41 level, represented by the monthly S2 and the weekly S1. The 1.4150 mark could act as a potential interim support, as it was successful in preventing the Cable from edging lower nine weeks ago.
Daily chart
With the breach of the up-trend, as seen on the hourly chart, the GBP/USD currency pair is likely to continue depreciating. The pair, however, appears to be glued to the 1.42 major level for now, as there is no impetus present today to trigger either a bullish or a bearish development.
Hourly chart
Bulls and bears remain in balance
There are more bulls than bears, as they take up 63% and 37% of the market, respectively, while the share of buy orders slid from 57 to 51%.
Compared to Tuesday, there are also slightly less bulls at OANDA - they take up 55% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is now neutral, as here the number of bears is equal to the number of bulls.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
The majority of traders (56%) believe the British currency is to cost 1.46 or more dollars after a three-month period. The most popular price interval was selected by slightly less than a fifth (17%) of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Sterling is to cost between 1.52 and 1.54 in three months, chosen by 14% of the surveyed. At the same time, the mean forecast for Sep 13 is 1.4627.