- The share of purchase orders slid from 51 to 46%
- 62% of traders hold long positions
- The nearest resistance is located at 1.4288
- The Bollinger band forms support circa 1.4226
- 55% of traders reckon GBP/USD will be at 1.46 or higher in three months
- Upcoming events: UK CPI, UK PPI, UK RPI, US Retail and Core Retail Sales, US Import Prices
The Sterling began the week with rather poor performance, being unable to post solid gains and having declined against most major peers on Monday. The risk-off sentiment caused the Pound to drop 0.65% against the safe-haven Yen, followed by a 0.32% drop against the Euro and 0.17% versus the Aussie. At the same time, the British currency remained relatively unchanged against three other major currencies, losing 0.06% against the Kiwi, adding 0.01% versus the Swissie and 0.09% against the US Dollar. The only notable rally of 0.43% was registered against the Canadian 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.
UK CPI and US Retail and Core Retail Sales
Today the UK inflation data is due, namely the UK 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 still on the back foot
On Monday profit-taking caused the GBP/USD currency pair to recover from its intraday low, but it was still unable to reclaim the 1.43 major level. Moreover, the trend remains bearish and daily technical indicators support that, as their signals are no long mixed, but also pointing south-ish. The Cable is still driven by the upcoming EU referendum concerns, which is the main impetus that is leading the pair to the downside. Fundamentals could still switch into the Sterling's favour, but the recovery is expected to be short-lived. Nevertheless, the base case scenario is a decline towards around the 1.42 mark, with a decent chance of it getting pierced also present.
Daily chart
The Cable remains glued to the 1.42 major level today, but with a number of data that could trigger either the bullish or a bearish development today. Risks, however, are skewed to the downside, with the main bottom target being the 1.4005 mark, namely the April low.
Hourly chart
Bulls are outnumbering bears
There are 62% of traders holding long positions today (previously 63%), whereas the share of purchase orders slid from 51 to 46%.
Compared to Monday, there are also slightly less bulls at OANDA - they take up 53% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is now bullish, as here the number of bulls exceeds the number of bears by ten percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
The majority of traders (55%) 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 14 is 1.4605.