GBP/USD – Pound Under Pressure, Tests 1.55 Line

The British pound continues its losing ways, as GBP/USD is very close to the 1.55 level. Thursday’s major release was US Unemployment Claims, and the indicator bounced back with an excellent reading. There are no releases out of the UK on Thursday.

The British pound continues to slide, and has now lost close to three cents this week. The fallout continues from the BOE Inflation report earlier this week, which stated that the UK economy is not expected to fully recover before 2015. Investors responded by dumping pounds, and the US dollar has taken full advantage. The pound has not been at such low levels since August 2012, as it struggles to find its footing. In the US, Unemployment Claims bounced back after two disappointing readings. There were 341 thousand new claims, well below the estimate of 361 thousand. We have been seeing a lot of mixed data out of the US, as the economy seems to take two steps forward and then one step back. The markets will be looking for more good news from US Consumer Sentiment numbers on Friday.

The markets are keeping an eye on the G-20 meeting, which begins on Friday. An important topic on the agenda will be the issue of exchange rates. There is mounting concern about currency wars, and Japan is coming under strong criticism for increasingly relying on monetary policy to kick-start its economy. The G-7, clearly concerned about the falling Japanese yen, reiterated its commitment to allowing the markets to determine exchange rates. The Institute of International Finance, which is comprised of leading banks and financial institutions, also weighed in on the matter. It urged the G-20 to take steps to avoid the “possible discord on exchange rates”. For its part, the Japanese government has defended its monetary policy, stating that its aggressive easing steps have been taken to combat deflation, and it has not actively devalued the yen. Japan’s trading partners may beg to differ, but we’re unlikely to see any fireworks at the G-20 over this matter. Given the need to reach a consensus, analysts expect any statement on currencies from the G-20 to be mild in nature.

GBP/USD for Thursday, February 14, 2013

GBP/USD February 14 at 15:55 GMT

1.5528 H: 1.5542 L: 1.5483

GBP/USD Technical

The pound continues to lose ground, and briefly dipped below the 1.55 level. The pair is receiving weak support at 1.5481, and this line could face more pressure if the pound’s slide continues. The support line of 1.5395 is stronger, and has not been tested since June 2012. On the upside, there is resistance at 1.5568. This is followed by resistance at 1.5625.

Current range: 1.5481 to 1.5668.

Further levels in both directions:

• Below: 1.5481, 1.5395, 1.5309, 1.5203 and 1.5129.
• Above: 1.5568, 1.5625, 1.5685, 1.5728, 1.5785, 1.5850, 1.5919

OANDA Open Positions Ratios

The GBP/USD ratio continues to point to a shift towards long positions. This is not reflected in the pair, as the pound continues to struggle. Despite the pound’s travails, trader sentiment remains strongly biased in favor of long positions, indicating an expectation that the pound will bounce back from the current downward trend.

The pound  continues to lose ground, and is fighting to stay above the 1.55 line. Will the downward swing continue? GBP/USD has shown a lot of volatility this week, and with key releases scheduled on Friday for both the UK and the US, the volatility could continue right up to the weekend.

GBP/USD Fundamentals

• 13:30 US Unemployment Claims. Estimate 361K. Actual 341K.
• 15:30 US FOMC Member Daniel Tarullo Speaks.
• 15:30 US Natural Gas Storage. Estimate -166B. Actual -157B.
• 17:50 US FOMC Member James Bullard Speaks.
• 18:00 US 30-year Bond Auction.

*Key releases are highlighted in bold

*All release times are GMT

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