GBP/USD – Pound Edges Lower After Recent Gains

The British pound was on fire late last week, but has since lost some ground. The pair shot up two cents on Thursday, and closed at the 1.56 level. It has since given up some of these gains, and is trading in the low-1.55 range in Monday’s North American session. It’s a quiet start to the week, with no major releases out of the UK or the US. The sole event out of the US is a speech by FOMC Member James Bullard. In the UK, RICS House Price Balance will be released later on Tuesday. The markets will be keeping a close eye on British Manufacturing Production, which will be released early on Tuesday.

The BOE was in the spotlight on Thursday, but there were no surprises as Governor Mervyn King chaired his last policy meeting. He will be replaced by Mark Carney, who is leaving the top post at the Bank of Canada. As expected, the BOE maintained QE at 375 billion pounds, and the key interest rate at 0.50%. There have been signs of improvement in the British economy, such as positive PMIs, and if this continues, the central bank will be able to contemplate reducing QE. The British pound took advantage of the positive UK releases and a broadly weakened US dollar, as GBP/USD climbed about 350 points last week.

US employment numbers were a mix last week. ADP Non-Farm Payrolls slipped badly, as the key employment indicator missed the estimate for the third consecutive month. The indicator posted a reading of 135 thousand, well off the forecast of 171 thousand. Unemployment Claims managed to meet the estimate, but the market reaction was lukewarm. Non-Farm Payrolls was strong, climbing from 165 thousand to 175 thousand. This was above the market forecast of 167 thousand. On the negative side, the Unemployment Rate rose edged higher to 7.6%, above the forecast of 7.5%. With speculation growing that the Fed could scale back QE in the next few months, employment figures have taken on added significance. However, the Fed may decide to hold a steady course if the employment picture remains cloudy.

 

GBP/USD for Monday, June 10, 2013

Forex Rate Graph 15/1/13

GBP/USD June 10 at 14:50 GMT

GBP/USD 1.5539 H: 1.5563 L: 1.5496

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5203 1.5309 1.5432 1.5557 1.5700 1.5802

 

GBP/USD has started the week slowly, in contrast to the strong volatility we saw last week. The pair is testing resistance at 1.5557. This is a weak line, and could be tested if the pound resumes its upward movement. This is followed by strong resistance at the round number of 1.5700. On the downside, GBP/USD continues to receive strong support at 1.5432. The next support level is at 1.5309, protecting the 1.53 line.

Current range: 1.5432 to 1.5557

 

Further levels in both directions:

  • Below: 1.5432, 1.5309, 1.5203, 1.5111, 1.5047 and 1.5000
  • Above: 1.5577, 1.5700, 1.5800 and 1.5869

 

OANDA’s Open Positions Ratio

GBP/USD is pointing to movement towards long positions. This is not reflected in pair, which is showing very little movement in the Monday session. Traders should continue to monitor the ratio, as an increase in activity could signal that GBP/USD will also show movement. It should also be noted that the ratio is close to a split between long and short positions, indicating a lack of bias from traders as to the direction that the pair might take.

 

GBP/USD Fundamentals

  • 13:50 US FOMC Member James Bullard Speaks
  • 23:50 British RICS House Price Balance. Estimate 2%

 

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.