- 85% of all pending orders are to sell the Pound
- 57% of all open positions are short
- The nearest resistance is located around 1.47
- The weekly R2 forms support at 1.4631
- 52% of traders reckon GBP/USD will be at 1.46 or higher in three months
- Upcoming events: Fed Chair Yellen Testimony, US Existing Home Sales, US Crude Oil Inventories
The Sterling's bullish momentum was mostly reversed on Tuesday, with the UK currency sustaining losses against most major peers. However, the losses were rather mild, with the GBP/NZD declining 0.35%, the Cable edging 0.31% higher and GBP/CHF down 0.30%. Furthermore, the Pound suffered a 0.22% loss against the Loonie and 0.20% versus the Aussie. However, the British currency was able to outperform two major peers, namely adding 0.35% against the Euro and 0.47% against the Japanese Yen.
As reported by the US Census Bureau, there were 1.164 million constructions of residential buildings The UK Public Sector Net Borrowing figure improved with the latest release, which showed that the borrowing was at £9.7 billion in May, beating the £9.35bn forecast. Moreover, the April's data was also revised up to £8.2 billion from the initial £6.58 billion, meaning that it was significantly worse than first thought. An increase in the deficit has been detected mostly due to higher government spending, which rose to £56 billion, while central government investment rose up to 2.8%, followed by an increase in debt interest to 16.7%. There was also a downward revision to net borrowing in the preceding year, namely down to £74.9 billion, down £16.7 billion in comparison to the year before that, as reported by the Office for National Statistics.
Nevertheless, according to the Office for Budget Responsibility's March budget review, this figure is still above their target of £72.2 billion. The OBR also kept revising its medium-term forecasts, amid the government receipts failing to meet expectations, with them anticipating the government to miss its surplus target only starting from 2019. Overall, debt keeps rising, excluding taxpayer-backed banks, which was equal to 83.7% of GDP at the end of May, or £1.6 trillion.
Focus shifts to US data ahead of EU referendum
Federal Reserve governor Janet Yellen's Testimony is due for the second day today. As head of the central bank, which controls short-term interest rates, she has more influence over the nation's currency value than any other person. More insight concerning future interest rate hikes and the overall economic condition in the US is expected. Another event is the US Housing Price Index. It is released by the Federal Housing Finance Agency, which provides an estimated value of housing market conditions. It is an important indicator as the housing market is considered as a sensitive factor to the US economy.
GBP/USD risks falling back under 1.46
Upon reaching the 23-month resistance line on Tuesday, the Cable bounced back, erasing its intraday gains and ending the day with a 28-pip decline. The main resistance area is still represented by the down-trend, but the GBP/USD pair also appears to be struggling to climb over the 200-day SMA. As a result, the upside movement is likely to be capped around 1.4750, while the bearish development could extend towards the cluster circa 1.4515, formed by the monthly PP and the weekly R1. Moreover, technical indicators are in favour of the negative outcome, as they retain bearish signals in the daily timeframe.
Daily chart
The GBP/USD pair confirmed the 23-month down-trend on the hourly chart, but is undergoing a period of consolidation ahead of the EU referendum, a calm before the storm. Technically, we should see a decline at least towards the 200-hour SMA around 1.4350 in the upcoming days.
Hourly chart
Bears are now outnumbering the bulls
SWFX traders' sentiment remains bearish, now at 57% (previously 54%). Meanwhile, more and more pending orders in the 100-pip range are to sell the Pound ahead of the EU referendum, namely 85% today.
Compared to Monday, there are also slightly more bears at OANDA - they take up 54% of the positions open with the Canada-based broker. Sentiment at Saxo Bank is still bearish, as here the number of bears exceeds the number of bulls by 20 percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD above 1.46 in three months
Exactly half of traders (52%) 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 (15%) of the voters, namely the 1.46-1.48 one, while the second most popular choice implies that the Sterling is to cost between 1.50 and 1.52 dollars in three months, chosen by 13% of the surveyed. At the same time, the mean forecast for Sep 22 is 1.4545.
All in all, Community members, that took part in the survey last week, expect the pair to end this week ay 1.46, with number of bears (25%) versus bulls (75%).
This week megajorko is bullish on the Cable. He said that "everyone is expecting the Brexit referendum this week so anything can happen to the cable including decline to 1.35 and total rocket jump to 1.60."
At the same time, some traders expect the UK to vote to leave the EU, therefore, for the Sterling to weaken by week's end. "The Brexit referendum is approaching, thus everything will become clear on Thursday", he commented.