- The share of sell orders inched up from 55 to 58%
- Bullish traders' sentiment remains unchanged at 59%
- Immediate resistance is around 1.2515
- The closest support is at 1.2449
- Upcoming Events: UK Inflation Report Hearings, US Manufacturing PMI, US Services PMI
Sales in the United Kingdom dropped for the third straight month in January, indicating that consumers started feeling the pressure of higher prices and slower wage growth. According to the official data published by the British Office for National Statistics on Friday, retail sales slid 0.3% over the previous month, coming in short of analysts' expectations for a 1.0% increase and following a downwardly revised 2.1% slide in December. If compared with the same month a year ago, sales rose at the slowest pace since November 2013, jumping 1.5%. The downmove was mainly driven by higher prices of fuel and food at both conventional and online stores, which rose 1.9% on average in January when compared to the same month a year ago.
At this point, analysts worldwide expect prices to be on an uptrend through the year, as retailers are struggling to keep their businesses afloat following the devaluation of the Sterling caused by the decision of the UK to the European Union. Nevertheless, despite expectations for inflation to hit 3% and above this year, economists are eyeing rather anaemic wage growth, with real income being at risk of posting its worst year since 2013.
US Services and Manufacturing PMIs due today
On Tuesday the most impact is likely to be from the US fundamentals, namely the Services PMI and the Manufacturing PMI. The Services PMI captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in the US. The Manufacturing PMI, however, captures business conditions in the manufacturing sector. It is an important indicator of business conditions and the overall economic condition in the US, also taking up a significant part of total GDP.
GBP/USD remains on the back foot
The GBP/USD pair erased most of Friday's losses yesterday, successfully climbing over the 1.2450 level, thus, breaching the immediate resistance area. Now the British currency is being supported by a strong demand area around the 1.24 major level, with the weekly PP just being a minor nuisance located at 1.2449. Technically, the Cable should remain above the 1.24 mark today and pave its way towards retaking the 1.25 handle. However, technical indicators are still unable to confirm the possibility of the positive outcome, leaving the door open for another leg down.
Daily chart
On the hourly chart the Cable is seen trading within a triangle pattern, with the trading range constantly narrowing. The upper trend-line was somewhat confirmed yesterday, as the pair was unable to even breach the 200-hour SMA. Right now the GBP/USD pair began moving towards the lower boundary, where it is expected to find support and eventually rebound.
Hourly chart
Traders mostly bullish
Bullish traders' sentiment remains unchanged at 59% for the third time in a row. At the same time, the share of sell orders inched slightly higher, namely from 55 to 58%.
A slightly less optimistic situation is observed elsewhere. For example, 56% of positions open at OANDA are currently long. This is more than the share of shorts (44%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 62% of traders now being long and the other 38% 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 56% of survey participants believe so. While the current price is around 1.2450, the average forecast for May 21 is 1.2486. The 1.20-1.22 interval is now the most popular price interval, having 18% of the votes, while on the second place is the 1.34-1.36 price range, with 12% of poll participants choosing it. Furthermore, the 1.30-1.32 interval was chosen by 11% of the voters.