- The share of buy orders edged down from 52 to 44%
- 62% of traders with a positive outlook towards the Sterling
- Immediate resistance is around 1.2780
- The closest support is around 1.2570
- Upcoming events: UK Manufacturing PMI, UK Goods Trade Balance, UK Industrial Production, US Average Hourly Earnings, US Non-Farm Employment Change, US Unemployment Rate, FOMC Members Fischer, Mester, George and Brainard Speeches
The number of Americans filing for unemployment benefits dropped to its lowest level in 43 years, official figures revealed on Thursday.According to the US Department of Labor, initial jobless claims fell 5,000 to a seasonally adjusted 249,000 in the week ending October 1, compared to the preceding week's reading of 254,000, while market analysts anticipated a slight rise to 255,000 in the reported period. It was the 83rd consecutive week of initial claims remaining below the 300,000 level, the longest streak since 1973. Furthermore, the four-moving average of claims, considered a better measure of labor market trends, declined 2,500 to 253,000 last week, the lowest level since December of 1973. The data also showed the number of continuing claims decreased 6,000 to 2.058 million in the week ended September 24, while its four-week moving average declined 21,000 to 2.095 million.
Meanwhile, analysts expect Friday's NFP report to announce 171,000 new jobs for September and the unemployment rate to remain unchanged at 4.9%. Immediately after the release of initial jobless claims, the US Dollar rose against other major currencies, trading at 1.1179 against the Euro, 1.2641 against the British Pound and 103.89 against the Japanese Yen, while its Index advanced to 96.44.
UK Manufacturing Production, US NFP and Unemployment Rate
Today attention should be paid to the UK Manufacturing Production, which measures the manufacturing output. Manufacturing Production is significant as a short-term indicator of the strength of the UK manufacturing activity that dominates a large part of total GDP. At the same time, the most important event from the US side will be the Nonfarm Payrolls. They present the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish), although previous months reviews and the unemployment rate are as relevant as the headline figure, and therefore market's reaction depends on how the market assets them all. The Unemployment Rate also plays a huge role. It is a percentage that surges from dividing the number of unemployed workers by the total civilian labor force. It represents the percentage of people actively seeking employment and willing to work. Usually, as a higher rate is seen in recessionary economies, while on the contrary, a growing economy sees its unemployment rate decreasing. Therefore, a decrease of the figure is seen as positive for the USD, while an increase is seen as negative, although by itself, the number can't determine the markets move as it depends on the headline reading, namely the Nonfarm Payrolls.
GBP/USD dives on harsh ‘Brexit' expectations
The Cable failed to remain above the 1.27 level yesterday, having slumped to 1.26, finding support only at the monthly S2. Nevertheless, early during the Asian today all supports crumbled, causing the Pound to drop to 1.1950 dollars. The sell-off was triggered by growing fears that ‘Brexit' will have a much harder impact on the UK's economy than first anticipated. Eventually the pair managed to climb back above 1.24, but it is uncertain now whether the monthly S3 will hold through the day. Today's US NFP data could help the Pound even reclaim 1.25 if the British currency refrains from falling deeper down until then.
Daily chart
Yesterday the Cable approached the descending channel's support line, where a rebound was expected, but a sudden sell-off caused the trend-line to be breached. Technically, the GBP/USD pair should continue sliding down, but a potential market mover could still cause the Sterling to retake the 1.25 mark.
Hourly chart
Traders remain undecided
There are 62% of traders with a positive outlook towards the Sterling, compared to 65% yesterday. Meanwhile, the share of buy orders edged down from 52 to 44% over the past 24 hours.
A similar situation is observed elsewhere. For example, 60% of positions open at OANDA are currently long. This is more than the share of shorts (40%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is somewhat bullish, with 57% of traders being long and 43% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be more or less at the same level where it is now. While the current price is around 1.30, the average forecast for January 07 is 1.3043. Interestingly enough, however, the 1.30-1.32 interval is not the most popular one, having only 13% of the votes. Most of the votes are concentrated in 1.28-1.30 (19%) intervals. Furthermore, 50% all survey participants believe the Cable is to climb over 1.30.