- 57% of traders being long the Sterling
- 53% of all pending orders are to sell the British currency
- Immediate resistance is around 1.2510
- The closest support is at 1.2449
- Upcoming Events: US Initial Jobless Claims, US HPI, US Crude Oil Inventories, US New Home Sales, Reuters/Michigan Consumer Sentiment
The British economy showed first signs of Brexit vote influence, as the overall growth slowed, seeing the annual GDP growth rate holding steady at 2%, behind expectations for a 2.2% increase. Nevertheless, according to the second GDP estimate released by the Office for National Statistics on Wednesday, the UK economy expanded 0.7% in the Q4, the strongest performance since the last quarter of 2015, compared with a 0.6% growth pace observed in the previous quarter. In the report, the ONS highlighted that economic growth was mainly boosted by upwardly revised manufacturing output, which expanded 1.2% from 0.7% registered previously. As to the expenditure side, net trade and household consumption supported the economy, while capital spending levels set negative impact on the overall economic performance in the United Kingdom.
In the meantime, the weak Pound is expected to support exports in the foreseeable future, though risks brought by the Brexit are still in place.
Relatively quiet Thursday
Thursday is a relatively quiet day, with the only events being the US Housing Price Index and the Initial Jobless Claims. The 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 sin this market, which influences the strength and direction of the US economy. However, this data tends to have a very limited impact on the exchange rates. The Housing price Index provides an estimated value of housing market conditions. It is an important indicator, as the housing market is considered as a sensitive factor to the US economy.
GBP/USD in limbo above the weekly PP
The British Pound remained rather muted against the US Dollar during the last three days, with the tough support area circa 1.24 keeping the pair afloat. Even though there is some room for another leg down, same as yesterday, assuming the weekly pivot point at 1.2449 manages to hold the Cable—a positive development would not be a surprise. However, the main target, namely the resistance around 1.25, is unlikely to be breached due to lack of potential market movers. Meanwhile, technical indicators also keep giving bullish signals in the daily timeframe, unable to confirm the possibility of the positive outcome.
Daily chart
As was anticipated, the up-trend on the hourly chart prevented the Cable from edging lower on Wednesday, and is expected to put the down-trend to the test. Despite being bolstered by the 200-hour SMA, the trend-line risks getting pierced due to an earlier violation attempt.
Hourly chart
Traders mostly bullish
There are 57% of traders being long the Sterling today, whereas 53% of all pending orders are to sell the British currency.
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 1.2450, the average forecast for May 23 is 1.2546. The 1.20-1.22 interval is now the most popular price interval, having 23% of the votes, while on the second place are the 1.18-1.20 and the 1.34-1.36 price ranges, with 13% of poll participants choosing each of them. Furthermore, the 1.28-1.30 and the 1.30-1.32 intervals were each chosen by 10% of the voters.