- The portion of buy orders inched higher from 47 to 51%
- Market sentiment remains bullish at 60%
- Immediate resistance is around 1.2485
- The closest support is circa 1.24
- Upcoming Events: US GDP Annualized, US Goods Trade Balance, US CB Consumer Confidence, Chicago PMI
New orders for US-made capital goods advanced more than expected in January due to strong demand for passenger airplanes and new bookings for fighter planes and related military equipment. According to the Commerce Department, total durable goods orders spiked 1.8% in the past month compared with a downwardly revised 0.8% reading registered in December. The main driver for the jump was a significant increase in orders for transportation goods which surged 6.0% in January. Orders excluding aircraft fell 0.2%, missing expectations for a 0.5% rise on the month. Moreover, there were notable decreases in orders for electrical equipment, appliances and components as well as computers and electronic products. In the meantime, non-defense capital goods orders went down 0.4%, following an upwardly revised 1.1% gain in December, while machinery orders soared 0.5%, giving a 4.3% annual gain which is likely to heighten confidence in manufacturing outlook.
Overall, strong durable goods report followed recent growth in consumer spending and home sales as the Greenback stabilised and oil prices resumed growing. In addition, the Trump administration plans to cut corporate taxes and diminish regulations are set to help businesses, though surrounding uncertainty might prevent proceeding with investments in the near term.
Attention turns to US data
Since there are no events from the UK side on Tuesday, all attention turns to the US fundamentals, such as the Annualized GDP. It shows the monetary value of all the goods, services and structures produced within a country in a given period of time. GDP Annualized is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. Another event worth paying attention to will be the CB Consumer Confidence. It captures the level of confidence that individuals have in economic activity. Finally, the Chicago PMI. It captures business conditions across Illinois, Indiana and Michigan. This index is an indicator of business trends and it is interrelated with the ISM Manufacturing Index. It is widely used to indicate the overall economic condition in the US.
GBP/USD holds above 1.24
Even though the Cable experienced another leg down on Monday, the support cluster around 1.24 managed to limit the losses and keep the pair elevated once again. The 1.24 itself is providing strong psychological support, and with a number of other significant levels this area appears to be impenetrable. The GBP/USD pair would require a strong impetus, a political event or fundamental event, which could provide sufficient bearish momentum for a drop below 1.24. Such an event could occur today; however, from the technical side the Sterling should edge higher, with the 1.25 mark seen retaken. The bearish trend-line is likely to be the ceiling in case of a positive development.
Daily chart
The hourly chart confirms the picture of the daily one, with the 1.24 being a tough support, which kept the pair afloat for quite some time now. Consequently, another rebound from the 1.24 mark would not be a surprise, even though downside risks are present today. A close below this mark would become the lowest one this year so far.
Hourly chart
Traders mostly bullish
Market sentiment remains bullish at 60%, but the portion of buy orders inched higher from 47 to 51% during the last 24 hours.
A slightly less optimistic situation is observed elsewhere. For example, 61% of positions open at OANDA are currently long. This is more than the share of shorts (39%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 61% of traders now being long and the other 39% 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 1.24, the average forecast for May 28 is 1.2529. The 1.20-1.22 interval is now the most popular price interval, having 17% of the votes, while on the second place is the 1.34-1.36 price range, with 16% of poll participants choosing it. Furthermore, the 1.18-1.20 and the 1.28-1.30 intervals were each chosen by 12% of the voters.