- Buy orders take up 61% of the market
- 65% of all open positions are long
- Immediate resistance is at 1.2184
- The closest support is around 1.2130
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Upcoming Events: US Initial Jobless Claims, US Import Price Index
The UK Finance Minister Philip Hammond presented his annual budget statement for the 2017-18 fiscal year on Wednesday. According to the latest projections, the British economy is likely to expand 2% in 2017, compared to a previous estimate of 1.4%. Nevertheless, during the next year economic growth is expected to fall to 1.6% and then climb to 1.7% and 1.9% in 2019 and 2020, respectively. Hammond also said that a return to a 2% growth rate is expected in 2021. Meanwhile, inflation is seen hitting 2.4% in 2017, before slowing to 2.3% in 2018. Inflation is expected to return to the Bank of England's target rate of 2% in 2019. Net borrowing in the public sector is predicted to drop to 2.6% in 2016-2017, compared with 3.8% in 2015-2016, and rebound to 2.9% in 2017-2018.
However, Hammond highlighted that it would probably decline to 1.9% in 2018-2019 and hit 0.7% in 2021-2022. He also said that the personal allowance would increase to 11,500 pounds, as well as the higher rate of income tax threshold would rise to 45,000 pounds. For small businesses the tax-free dividend allowance would decline to 2,000 pounds. Furthermore, the government would give a 1,000 pound discount on business rate bills for all pubs with rateable value up to 100,000 pounds in 2017.
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US Initial Jobless Claims and Import Price Index
Thursday is usually a day when markets take a breath. Today is not an exception. Among important data only two events are worth paying attention to. First of all, the US Initial Jobless Claims, which 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. Another event will be the Import Price Index. It informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise.
Read More: Fundamental Analysis
GBP/USD keeps climbing down the ladder
Wednesday was another negative day for the British currency, being that it edged lower against the Buck again. This time the 1.22 threshold has been crossed, meaning the Cable is one step closer to reaching the 1.1947 level—the lowest in more than ten years. Even though the lower Bollinger band and the monthly S2 now represent immediate support around 1.2130, this area is unlikely to hold the GBP/USD pair afloat for long, namely it is expected to remain intact only today. Meanwhile, technical indicators remain unchanged, with the weekly signals still bearish.
Daily chart
© Dukascopy Bank SA
The Cable continued to test the descending channel's resistance line yesterday, and from the looks of it – the given pair is likely to remain within the channel's border for at least another day. All attention will be on tomorrow's events, as a strong reading of the US NFP data could cause the Cable to retest the channel's lower boundary and even establish a new 2017 low.Hourly chart
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Traders mostly bullish
Traders keep getting more bullish towards the Sterling, as now 65% of all open positions are long, compared to 61% on Monday. The portion of buy orders is also relatively large, taking up 61% of the market.
A slightly more optimistic situation is observed elsewhere. For example, 65% of positions open at OANDA are currently long. This is more than the share of shorts (35%), barely sufficient for the sentiment to be called bullish. Meanwhile, sentiment at Saxo Bank is also bullish, with 70% of traders now being long and the other 30% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect the Cable to keep falling
© Dukascopy Bank SABy the end of the next three months traders expect the Cable to fall under the 1.22 major level, as 53% of survey participants believe so. While the current price is around 1.22, the average forecast for June 09 is 1.2336. The 1.20-1.22 interval is now the most popular price interval, having 20% of the votes, while on the second place are 1.18-1.20 and 1.28-1.30 price ranges, both with 15% of poll participants choosing them. Furthermore, the 1.30-1.32 interval was chosen by 13% of the voters.