- The share of sell orders slid from 56 to 53%
- 61% of traders hold long positions
- Immediate resistance is at 1.2474
- The closest support is around 1.24
- Upcoming Events: US Building Permits, Philadelphia Fed Manufacturing Index, US Initial Jobless Claims, US Housing Starts
The number of Britons filing for unemployment benefits dropped markedly last month, while wage growth slowed in the Q4. The Office for National Statistics reported on Wednesday the number of claimants declined 42,400 to 787,400 in January, following the preceding month's upwardly revised fall of 20,500. In the meantime, including bonuses, average hourly earnings climbed 2.6% on an annual basis in the Q4 of 2016, while analysts expected an unhanged reading from the prior month, when the Average Earnings Index rose 2.8%. Excluding bonuses, earnings advanced 2.6%, falling behind analysts' expectations for a 2.7% climb. Wage growth is closely followed by the Bank of England in the wake of the Brexit vote, as an acceleration in pay growth amid higher inflation could force the Bank to raise interest rates. Inflation rose 1.6% in the 12 months to December 2016.
Nevertheless, analysts say they do not expect wage growth to pick up in the upcoming months. Wednesday's data also showed the unemployment rate held steady at its 11-year low of 4.8% during the final quarter of 2016, in line with economists' forecasts. The data suggests that the labour market was not affected by the June 23 referendum; however, the 2017-year outlook remains ambiguous. The number of foreign workers in Britain declined 9,000 on a quarterly basis in the Q4.
US secondary data is due today
Thursday is a relatively calm day, with the only relevant events being the Philadelphia Fed Manufacturing Survey, the US Initial Jobless Claims and the US Building Permits. The Building Permits show the number of permits for new construction projects. It implies the movement of corporate investments and tends to cause some volatility to the USD. The Initial Jobless Claims are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy. Next, the Philadelphia Fed Manufacturing Survey, it 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.
GBP/USD poised to begin recovering
Even though the GBP/USD currency pair experienced strong downside volatility on Wednesday, it still managed to close above the 1.2460 psychological support. Assuming the given support level remains strong the Cable should now edge higher, ignoring the immediate resistance, namely the weekly PP at 1.2474. Instead, attention should be paid to the 20-day SMA, which rests around 1.2521, but the intraday ceiling could even be the 1.2550 mark—also a psychological level. Meanwhile, technical indicators support the possibility of the positive outcome and an additional purchase signal was provided two days ago, when the 55-day SMA climbed over the 100-day one.
Daily chart
Once again the Cable proved that its consolidation trend remains intact, as the exchange rate began moving towards the 1.25 major level after having bottomed out near 1.24 yesterday. Consequently, gains are unlikely to last and the polarity is expected to shift before the pair reaches 1.26.
Hourly chart
Traders mostly bullish
Bullish sentiment still holds more or less at the same level, taking up 61% of the market today. The share of sell orders slid from 56 to 53%.
A slightly less optimistic situation is observed elsewhere. For example, 59% of positions open at OANDA are currently long. This is more than the share of shorts (41%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 59% of traders now being long and the other 41% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
By the end of the next three months traders expect the Cable to rise above the 1.22 major level, as 55% of survey participants believe so. While the current price is around 1.25, the average forecast for May 14 is 1.2443. The 1.20-1.22 interval is now the most popular price interval, having 15% of the votes, while on the second place is the 1.30-1.32 price range, with 15% of poll participants choosing it. Furthermore, the 1.14-1.16 and the 1.28-1.30 intervals were chosen by 11% of the voters each.