- The portion of purchase orders edged higher from 43 to 52%
- Bullish traders' sentiment remains unchanged at 59%
- Immediate resistance is around 1.2315
- The closest support is at 1.2250
- Upcoming Events: US Initial Jobless Claims
British manufacturing activity expanded at the slowest pace since November 2016 last month, a private survey revealed on Wednesday. Markit reported its PMI for the UK manufacturing sector dropped to a seasonally adjusted 54.6 points in February, while the preceding month's reading was revised up from 55.7 to 55.9 points. Market analysts anticipated a slighter decrease to 55.6 last month. Nevertheless, any reading above the 50 point level indicates industry expansion. Moreover, Markit said that production and new order growth remained solidly above the long-term average of 51.6 points. The figures suggested that the weaker Pound, which dropped around 12% since the Brexit vote, helped to boost sales for some manufacturing sector participants last month. The survey suggests that manufacturing output growth is likely to approach the 1.5% mark in the first quarter of 2017, which would be the best reading in the last seven years.
However, some analysts claim that a high growth rate could not be maintained in the long-term. Data also showed employment rose for the seventh consecutive month in February, with job gains posted by businesses of different sizes. After the release, the British Pound fell against other major currencies, trading at 0.8521 against the Euro and 1.2371 against the Greenback.
US Initial Jobless Claims is the only event today
Thursday is a calm day compared to yesterday. There is only one event due that could have an impact on the GBP/USD exchange rate – the US Initial Jobless Claims. It is 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. However, the given data release tends to have a low impact on the exchange rates.
GBP/USD trades under 1.23
The Cable experienced another decline on Wednesday, with concerns over Brexit continuing to weigh on the British Pound. Another slide down is expected, which would be the fifth consecutive one, with the pair slowly approaching the multi-year low of 1.1947. The closest significant support is the monthly S1, located at 1.2250, although its breach would not be a surprise. As a result, the 1.22 major could soon be pierced, and another step closer to multi-year low made. Meanwhile, technical indicators are bolstering the possibility of the negative outcome, as they keep giving bearish signals today.
Daily chart
With another relatively sharp decline yesterday, the Cable got closer to putting the 1.2252/50 area to the test. A failure to rebound here suggests the exchange rate could continue falling until the 1.1947 level is eventually reached, with no other significant level being on the pair's path.
Hourly chart
Traders mostly bullish
Bullish traders sentiment remains unchanged at 59% today, but the portion of purchase orders edged higher in the last 24 hours, namely from 43 to 52%.
A slightly more optimistic situation is observed elsewhere. For example, 62% of positions open at OANDA are currently long. This is more than the share of shorts (38%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 63% of traders now being long and the other 37% 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 51% of survey participants believe so. While the current price is around 1.24, the average forecast for June 02 is 1.2407. The 1.20-1.22 interval is now the most popular price interval, having 22% of the votes, while on the second place is the 1.28-1.30 price range, with 19% of poll participants choosing it. Furthermore, the 1.18-1.20 interval was each chosen by 15% of the voters.