- The share of sell orders edged up from 56 to 65%
- Bullish traders' sentiment returned to previous Monday's level of 61%
- Immediate resistance is around 1.2455
- The closest support is at 1.2254
- Upcoming events: US Labor Market Conditions Index, US Federal Budget Balance
According to the Officials figures, Britain's industrial output dropped in August while the trade deficit widened. The Office for National Statistics announced that industrial production decreased 0.4% in August after a 0.1% rise in July. The data was smaller, than economists' predictions of another 0.1% increase. It is evident, that export was spurred by the weak pound, which touched new 31-year lows against the dollar on Friday due to the worries over the UK's prospects outside the EU. Nevertheless, industrial production is only a small part of the UK economy. Manufacturing production, in turn, went up less than expected in August, by a seasonally adjusted 0.2% in August, worse than expectations for a gain of 0.5% and following a drop of 0.9% a month. The UK manufacturers have reported an advance in both domestic and overseas demand, but imports are now more expensive as sterling depreciates.
In the meantime, several economists have pointed to a series of surveys showing rising business confidence, as evidence that Brexit has not hit the economy. But, while sentiment has bounced back, hard figures on actual output have been less encouraging.
Uneventful beginning of the week
Being that there is a bank holiday in the US today, there will not be any significant events on Monday. Tuesday is also quiet in terms of fundamental data, but on Wednesday the most important event will be the FOMC Meeting Minutes. FOMC stands for the Federal Open Market Committee, that orgianizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.
GBP/USD risks falling under 1.24
On Friday the Sterling failed to reclaim the 1.25 major level, but also managed to remain above the 1.24 level, despite the initial hard slump. However, risks are still skewed to the downside, with the Cable facing a relatively strong resistance area around 1.2460, represented by the weekly PP and the Bollinger band. This supply area could trigger more weakness, causing the GBP/USD pair to pierce the 1.24 level. Meanwhile, the nearest support lies only at 1.2254, namely the monthly S3, but a drop that low is unlikely, as technical indicators retain mixed signals and no driver that could cause such a slump is present today.
Daily chart
The GBP/USD currency pair appears to have formed another descending channel pattern since the beginning of last week. The Cable is likely to remain within the borders of the pattern, as there is no impetus present that could cause a breakout.
Hourly chart
Traders remain undecided
Bullish traders' sentiment returned to previous Monday's level of 61%, while the share of sell orders edged up from 56 to 65%.
A similar situation is observed elsewhere. For example, 56% of positions open at OANDA are currently long. This is more than the share of shorts (44%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is somewhat bullish, with 62% of traders being long and 38% 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 10 is 1.3039. Interestingly enough, however, the 1.30-1.32 interval is not the most popular one, having only 15% of the votes. Most of the votes are also concentrated in 1.28-1.30 (15%) interval, followed by the 1.32-1.34 price range with 14% of the votes. Furthermore, 54% all survey participants believe the Cable is to climb over 1.30.