- 61% of all pending orders are to sell the British currency
- 69% of traders are long the Sterling
- Immediate resistance is around 1.2280
- The closest support is at 1.2183
- Upcoming events: UK Net Lending to Individuals, US Core PCE Price Index, US Personal Spending and Income, Chicago PMI
The US economy expanded at its fastest pace since 2014 in the Q3 of 2016 amid higher exports and a rise in inventory investment, official data revealed on Friday. According to the US Department of Commerce, the economy grew 2.9% in the Q3, following the preceding quarter's 1.4% growth and surpassing the 2.5% pick up market forecast. It was the strongest expansion since the Q3 of 2014. However, the stronger than expected figures are unlikely to influence the Federal Reserve's views, as it is more focused on employment and inflation. US exports jumped 10% in the Q3, the largest increase since the Q4 of 2013, contributing 0.83% to GDP growth. The Q3 rise in exports was led by soybeans and analysts suggest that the momentum could be lost in the Q4. Inventory accumulation by businesses increased $12.6 billion in the reported quarter, contributing 0.61% to GDP growth.
Investment in non-residential structures advanced 5.4% in the Q3, the biggest gain since the Q2 of 2014, compared to the prior quarter's 2.1% drop. Meanwhile, business spending on equipment declined 2.7%, falling for the fourth consecutive month. Separately, the Labor Department said the Employment Cost Index remained unchanged at 0.6% in the Q3, in line with analysts' expectations.
US data to have the most impact
Today there is only one event concerning the UK, namely the Net Lending to Individuals. Net Lending to Individuals is a monthly measure of growth rates, amounts outstanding and changes in total lending to individuals, divided into lending secured on dwellings and consumer credit. It shows a picture of whether or not consumers are willing to spend money. From the US side the Core Personal PCE Price Index is due. It is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products, such as food and energy, in order to capture an accurate calculation of the expenditures. It is a significant indicator of inflation. At the same time the Personal Spending and Income are due. The Spending measures purchases of goods and services by households and by nonprofit institutions, that serve households from private business. The Income, however, measures the total income received by individuals, from all sources including wages and salaries, interest, dividends, rent, workers' compensation, proprietors' earnings, and transfer payments. This figure can provide insight on the US employment situation.
GBP/USD in tight range between 1.2150 and 1.2250
At the end of the previous week the Sterling managed to post mild gains against the US Dollar, but was unable to reclaim the 1.22 major level. The Cable is likely to struggle to overcome this area today as well, despite being supported by the weekly pivot point just under the opening price. At the same time, a relatively strong resistance area rests around 1.2280, which is likely to limit any possible gains today. Moreover, the pair struggled to breach the 1.2250 area through all of the previous week, as well was reluctant to maintain trade below the 1.2150 mark for more than two weeks. With technical indicators retaining mixed signals, the Pound is to remain relatively flat circa 1.22.
Daily chart
On the hourly chart the Cable was seen putting the lower boundary of its current consolidation trend to the test on Friday. However, similarly to the daily chart, the 200-hour SMA is providing resistance around the Bollinger band of the daily one, thus, suggesting a significant surge beyond the 1.22 level is unlikely.
Hourly chart
Traders mostly bullish
There are still 69% of traders being long the Sterling, whereas 61% of all pending orders are to sell the British currency (previously 65%).
A similar situation is observed elsewhere. For example, 64% of positions open at OANDA are currently long. This is more than the share of shorts (36%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 67% of traders being long and 33% being short the Sterling against the US Dollar, a significant increase from 52% on Friday.
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 higher than the level where it is now. While the current price is around 1.22, the average forecast for January 31 is 1.2365. Furthermore, the 1.18-1.20 interval is now the most popular one, having 17% of the votes. On the second place in terms of the votes are the 1.16-1.18 (12%) and the 1.20-1.22 (12%) intervals, followed also by the 1.28-1.30 with 10% of the votes. Moreover, 79% all survey participants believe the Cable is to fall under 1.30.