- 60% of all pending orders are to sell the Buck
- 51% of traders hold short positions
- Immediate resistance is around 1.3020
- The closest support is at 1.2897
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Upcoming events: US Core PCE Price Index, US Personal Spending & Income, US Manufacturing PMI
The British economy expanded at a slower than expected pace in the three-month period to March, as consumers began feeling the impact of rising inflation amid the sharp fall in the value of the Pound. The Office for National Statistics Reported on Friday that the economy grew 0.3% in the Q1 of 2017, compared to a 0.7% growth pace posted in the final quarter of 2016. Meanwhile, market analysts expected the economy to expand at a 0.4% rate in the reported quarter. Friday's data confirmed an economic slowdown driven by the country's decision to leave the European Union. Some analysts suggested that the upcoming UK General Election also added to economic weakness.
Therefore, according to their forecasts, the British economy is set to expand 0.2% in the Q2 of 2017. Since Britain's decision to withdraw from the EU inflation rose to 2.3% and many analysts expect it to reach 3% in the upcoming months. On an annual basis, the economy expanded 2.1%, up from a 1.9% pace registered in the Q4. That marked the strongest pace of growth since the Q2 of 2015. Both Bank of England and IMF expect the economy to grow 2.0% this year, while the majority of analysts see weaker growth this year. The services sector, which account for 70% of GDP, grew 0.3% in the Q1, the weakest since 2015.
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Focus turns to US fundamentals
This Monday is a rare one, as there are some fundamentals to focus on. Usually, not many economic data releases are scheduled for Mondays, but today attention could be paid to the USD Personal Spending and Income. The Personal Income measures the total income received by individuals from all sources, including wages and salaries, interest, dividends, rent, transfer payments. This figure can provide insight on the US employment situation. As for the Personal Spending, it measures purchases of goods and services by households and non-profit institutions that serve households from private business. Another relatively important data release will be the US Core PCE Price Index. It is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products, such as food and energy, in order to capture an accurate calculation of the expenditure. It is a significant indicator of inflation. Finally, the most important data release today – the US Manufacturing PMI. It is released by both Markit Economics and the Institute for Supply Management, and captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in the US.
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GBP/USD to begin edging lower
Substantially weak US GDP data on Friday allowed the British Pound to take the upper hand and experience another leg up. As a result, the Cable got close to retesting the broadening rising wedge's resistance line, thus, a U-turn today is the most probable outcome. The weekly pivot point is providing immediate support just under the 1.29 mark, but losses are expected to exceed this level, with focus falling on the weekly S1 at 1.2829. However, technical indicators in the daily timeframe are giving distinctly bullish signals, suggesting a close in the green zone is possible. There is room for a rally, where the 1.30 handle is likely to be the intraday ceiling.
Daily chart
Ever since the Cable broke out from the short-lived descending channel pattern, the pair has been steadily appreciating for four days in a row now. Even if this rally is reversed in next three days, the four-week up-trend circa 1.2870 is expected to prevent the Pound from suffering sharper losses and along with the 200-hour SMA trigger another rebound.Hourly chart
Read More: Technical Analysis
Traders are equally divided
There are 51% of traders holding short positions today (previously 50%), while 60% of all pending orders are to sell the Buck.
A less optimistic situation is observed elsewhere. The sentiment at OANDA remains bearish, namely 60% of all open positions are short and the remaining 40% are long. Meanwhile, sentiment at Saxo Bank worsened again over the day, with 59% of traders now being short and the other 41% being long the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders still indecisive
© Dukascopy Bank SABy the end of the next three months traders believe the Cable is to rise above the 1.26 major level, as 63% of survey participants believe so. While the current price is around 1.29, the average forecast for August 01 is 1.2791. The 1.28-1.30 and the 1.30-1.32 ranges are now the most popular price intervals, having 14% of the votes each, while on the second place are the 1.32-1.34 and the 1.34-1.36 ones, with 12% of poll participants choosing them both. Furthermore, the 1.20-1.22 interval was selected by 11% of the voters.