- The share of sell orders returned to its Monday's level of 60%
- 60% of all open positions are long
- Immediate resistance is around 1.2650
- The closest support is at 1..2550
- Upcoming events: UK Retail Sales, BoE Official Bank Rate, US CPI and Core CPI, Philadelphia Fed Manufacturing Survey, US Jobless Claims, US Current Account, US Markit Manufacturing PMI
The number of unemployment benefit claims in Britain rose less than expected last month, while the unemployment rate held steady. Official data published by Office for National Statistics on Wednesday showed claims for unemployment aid advanced 2,400 in November, while markets anticipated a gain of 6,200. The October figure was revised up to 13,300, the highest since February 2015, from the originally reported 9,800. In the meantime, the unemployment rate remained unchanged at its 11-year low of 4.8% as fewer teenagers and homemakers entered the labor market. That was in line with analysts' expectations. Nevertheless, the number of employed people dropped 6,000 to 31.8 million after hitting its record high in October. That marked the first fall since the three months to June 2015. The ONS also reported the Average Earnings Index jumped 2.5% year-over-year in the August-October period. Excluding bonuses, earnings increased 2.6%, the largest gain since mid-2015.
The UK economy performed far better than expected after the country's decision to leave the European Union; however, analysts still expect the economy to slow down sharply next year.
Another busy day
Thursday is also rich in terms of fundamental events. First of all, the UK Retail Sales. They measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core Retail Sales, however, exclude fuel. Furthermore, the MPC members are to decide whether to leave the BoE interest rate unchanged today and to discuss further UK's economic outlook. The BoE Meeting Minutes are likely to have the most impact on the Cable today. Later today the US CPI and Core CPI are due. The CPI is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. The Core CPI excludes the Food and Energy sector in order to capture a more accurate calculation. Another important event will be the Philadelphia Fed Manufacturing Survey, which is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of the ISM Index. Going further is the US Manufacturing PMI, which captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in the US. Finally, some attention should be paid to the Current Account. It is a net flow of current transactions, including goods, services and interest payments into and out of the US. A current account surplus indicates that the flow of capital into the US exceeds the capital reduction.
GBP/USD risks piercing wedge's support line
The GBP/USD currency pair underwent the anticipated decline on Wednesday, but with the broadening rising wedge's support line remaining intact. The trend-line was confirmed, but is still under the risk of getting breached today, as a number of fundamental events could trigger Pound-selling. The trend-line is also weaker today, as it is now reinforced only by the 20-day SMA, rather than the weekly S1, the monthly and the 55-day SMA as yesterday. As a result, the Cable risks falling back under 1.25, despite technical indicators retaining bullish signals. On the other hand, yesterday's losses could be completely erased should the fundamental data turn in Sterling's favour.
Daily chart
The breach of the 200-hour SMA yesterday caused the up-trend to be put to the test again, where the decline has stopped for the time being. From the technical point of view the Cable should rebound and appreciate today, however, due to this being a wedge pattern, downside breakout risks are also high enough.
Hourly chart
Traders mostly bullish
Today 60% of all open positions are long (previously 59%), while the share of sell orders returned to its Monday's level of 60%.
A similar situation is observed elsewhere. For example, 57% of positions open at OANDA are currently long. This is more than the share of shorts (43%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also 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 higher than the level where it is now. While the current price is around 1.24, the average forecast for March 15 is 1.2562. Furthermore, the 1.28-1.30 interval is now the most popular one, having 14% of the votes. On the second place in terms of the votes is the 1.30-1.32 (12%) interval, followed also by the 1.18-1.20 and 1.32-1.34 intervals, both with only 11% of the votes. Moreover, 62% all survey participants believe the Cable is to fall above 1.24.