- No change in the distribution between the buy (44%) and sell (56%) orders
- Share of bears went from 57 to 52%
- 1.3060 is the new short-term target
- Resistance near 1.3240
- Traders' forecasts remain stable
- Upcoming events: UK Average Earnings, Claimant Count Change, Unemployment Rate, US Import Prices, Crude Oil Inventories
British consumer prices held steady last month, ignoring an increase in the prices of imported raw materials driven by the country's decision to leave the European Union. According to the UK Office for National Statistics (ONS), the Consumer Price Index (CPI) came in at 0.6% in August, in line with last year's reading, whereas market analysts penciled in a slight increase to 0.7% in the reported month. On a monthly basis, the CPI grew 0.3% in August, up from the preceding month's fall of 0.1%, while economic desks expected the indicator to come in at 04%. Meanwhile, the so-called core CPI, which excludes food and energy prices, increased 1.3% on an annual basis in the eight month of the year, unchanged from July's reading, whereas analysts anticipated a slight rise to 1.4% in August. The British Pound dropped 0.6% against the US Dollar after the data release, trading at $1.3250 on the London Stock Exchange.
ONS data also showed that the Producer Price Index Input (PPI Input) rose 0.2% month-over-month in August, compared to July's downwardly revised gain of 3.1%. Markets expected the Index to come in at 0.6% last month. Furthermore, the Retail Price Index (RPI) climbed 1.8% in the same month, down from July's reading of 1.9% but in line with analysts' expectations.
UK data to deteriorate
Today we have a lot more busy schedule than yesterday. Volatility is to rise at 08:30 GMT with the releases on average earnings and claimant count in the United Kingdom. Both figures are expected to show some deterioration. Increase in labour costs is to decelerate from 2.4 to 2.1%, while while the number of people seeking unemployment benefits is to grow by 1.7K after contracting 8.6K just a month ago.
The next releases from the United States are unlikely to have as strong of an impact, but are still are worth following. In the afternoon Bureau of Labor Statistics is to reveal whether import prices did in fact fall 0.1% after growing the same percentage in July. Meanwhile judging by the average forecast for crude oil inventories as reported by Energy Information Administration, stock of barrels is to grow by 2.8M, although it decreased by as many as 14.5M during the previous weekly release.
GBP/USD dives under 1.3250; pair looks south
The support trendline (lower bound of the five-week channel) we expected to hold the pair failed before the Cable gained a solid foothold above 1.34 dollars, giving way for a sell-off. The immediate supports are represented by the 55-day SMA and monthly PP, but the current decline is likely to rush past the end-of-August lows of 1.3050 towards 1.2850, which proved to be significant both in July and August. In order for the pair to restore the bullish outlook, the price needs to close above 1.34 and confirm this level as the new support.
Daily chart
The hourly chart confirms GBP/USD breaking both trendlines that were supposed to ensure further appreciation of the Sterling. As this is no longer topical, we are waiting for the pair to form a new pattern or a trendline that would better describe the current state of affairs and give an insight into possible upward corrections. In any case, 1.3060 is the new short-term target.
Hourly chart
Less SWFX traders are short the Sterling
The number of bears decreased with depreciation of the Sterling—their share went from 57 to 52%. Nevertheless, there was no change whatsoever in the distribution between the buy (44%) and sell (56%) orders.
There is a different attitude towards the Pound among the clients of OANDA and Saxo Bank. In both cases the bulls are in a majority with 56% of the market. And although this is almost no change for OANDA, the share of longs at Saxo Bank was at 44% just yesterday.
Spreads (avg, pip) / Trading volume / Volatility
Traders' forecasts remain stable
Traders have not materially changed their view on GBP/USD since the beginning of July, with the average forecast fluctuating slightly in the range between 1.32 and 1.30 dollars. However, the actual percentage of people who voted for this interval is only 5%, and merely 11% of traders voted for the 1.30-1.34 interval, where the currency pair has been trading since the beginning of July. The most popular answer choice was the 1.36-1.38 interval, which was chosen in 15% of cases. At the same time, 43% of traders expect the Cable to be above 1.34 and 47% of traders expect the rate to be below 1.30 in three months.