- 58% of all pending orders to sell the Pound
- 62% of traders have a positive outlook towards the Sterling
- Immediate resistance is around 1.2450
- The closest support is at 1.2330
- Upcoming events: UK Public Sector Net Borrowing, US Existing Home Sales, US Crude Oil Inventories
Both building permits and housing starts dropped more than expected last month, suggesting that the Q4 growth rate could be possibly revised downwards. According to the US Department of Commerce, new-home construction fell 18.7%, the biggest decrease in almost two years, to a seasonally adjusted annual rate of 1.09 million units in November, while market analysts anticipated a slight deceleration to 1.23 million during the reported period. Housing starts tend to be volatile on a monthly basis. Meanwhile, the October figure was revised up to a 1.34 million-unit pace, the highest level since July 2007, from the originally reported 1.32 million. The Commerce Department also reported that building permits declined 4.7% to an annualized rate of 1.20 million units, following October's upwardly revised reading of 1.26 million, whereas economists expected them to decrease to a 1.24 million-unit pace.
Nevertheless, the National Association of Homebuilder's sentiment measure, released on Thursday, jumped to 70 points in December, the highest level in 11 years, compared to the previous month's figure of 63. December's increase was driven in large part by Donald Trump's surprise victory in the US presidential elections last month.
Quiet couple of days ahead
There are no significant events due until Thursday. Tuesday is a completely quiet day, but on Wednesday some attention could be paid to the US Existing Home Sales. They are released by the National Association of Realtors and provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. Generally speaking, a high reading is positive for the Dollar, while a low reading is negative.
GBP/USD keeps losing steam
More issues concerning ‘Brexit' continued to weigh on the British Pound on Monday, causing it to fall under the 1.24 mark. With the breach of this major level, the GBP/USD currency pair is expected to slide down further towards 1.2330, where the weekly S1 coincides with the lower Bollinger band, forming a relatively strong demand area. However, technical indicators suggest the Cable is to undergo a correction today, as they are giving bullish signals. Even though we do not rule out the possibility of a surge, the 55-day SMA and the monthly PP are unlikely to let the pair post significant gains today.
Daily chart
The Cable's inability to maintain trade near the 1.25 major level caused the pair to sustain relatively sharp losses, sliding back under 1.24. Although some attempts are being made to recover, they are likely to be in vain, with the exchange rate continuing to make its way to 1.23.
Hourly chart
Traders mostly bullish
There are 62% of traders with a positive outlook towards the Sterling today. There are slightly less orders to sell the Pound as well, namely 58%, compared to 60% on Monday.
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 also bullish, with 61% of traders being long and 39% 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 20 is 1.2516. Furthermore, the 1.28-1.30 and the 1.30-1.32 intervals are now the most popular ones, having 13% of the votes each. On the second place in terms of the votes are the 1.16-1.18 (11%), 1.18-1.20 (11%) and 1.24-1.26 (11%) intervals, followed also by the 1.32-1.34 interval, with only 10% of the votes. Moreover, 59% all survey participants believe the Cable is to fall above 1.24.