GBP/USD – Pound Under Pressure Despite Weak US Housing Data

GBP/USD has edged lower in Wednesday trading. The pair is trading in the low-1.55 range in Wednesday’s North American session. The pound briefly dropped below the 1.55 line but has recovered. Taking a look at economic news, US Pending Home Sales release posted a decline and dropped to a seven-month low. In the UK, CBI Realized Sales continued to surge and BOE head Mark Carney said the BOE would add stimulus if necessary.

US numbers have been pointing in all directions this week. On Wednesday, the news was not good as Pending Home Sales declined 1.1%, a seven-month low for the key housing indicator. This was well off the estimate of a 0.2% gain. The week started off poorly, as Core Durable Goods Orders and Durable Goods Orders both posted declines. There was better news from the manufacturing sector on Tuesday, as the Richmond Manufacturing Index soared in August and posted its highest level in over a year. CB Consumer Confidence looked very sharp, with its best showing since January 2008. The mixed data could mean that the Federal Reserve will be inclined to delay QE tapering until US economic numbers improve.

The US Federal Reserve has been tightlipped about when it might taper QE, but the recent Jackson Hole summit provided a glimpse of the divisions in the Fed as to when it might act. Fed chair Bernard Bernanke was a no-show at the summit, giving other policymakers an opportunity to express their views on QE. Dennis Lockhart, head of the Atlanta Fed, said that tapering could start in September, but only if US data justified such a move. There was a more hawkish statement from James Bullard, head of the St. Louis Fed. Bullard said that there was no need for the Fed to rush into QE tapering. The uncertainty over QE tapering has buoyed the US dollar, raised the yields on US treasury bonds and led nervous investors to pull billions of dollars out of emerging markets. With September just around the corner, we could see strong volatility in the markets as speculation over QE heats up.

In the UK, CBI Realized Sales continues to sparkle. Since posting a dismal reading of -11 points just three months ago, the index has made a remarkable recovery and hit 27 points in August. This is the index’s highest level since November 2012. Meanwhile BOE head Mark Carney said at a conference in Nottingham that the BOE is prepared to add stimulus if market expectations for higher interest rates affect the economy’s recovery. As the new head of the BOE, Carney has introduced forward guidance, in which the BOE has communicated that it plans to keep the benchmark interest rate at a record low of 0.50% until 2015 at the earliest. However, many investors believe the BOE could raise rates much sooner, given the improving UK economy and likely QE tapering by the US Federal Reserve. This has led to a rise in the yields of UK government bonds.

 

GBP/USD for Wednesday, August 28, 2013

Forex Rate Graph 15/1/13

GBP/USD August 28 at 15:15 GMT

GBP/USD 1.5534 H: 1.5552 L: 1.5429

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5309 1.5432 1.5527 1.5645 1.5756 1.5877

 

GBP/USD has posted modest losses in Tuesday trading. The pair fell sharply in the Asian session as it dropped into the mid-1.54 range. GBP/USD recovered these losses in European trading.

GBP/USD continues to face resistance at 1.5645. Next, there is resistance at 1.5756.

On the downside, the GBP/USD is testing support at 1.5527. This  line was breached earlier in the day and could fall if the dollar posts further gains. This is followed by a stronger support at 1.5432.

  • Current range: 1.5527 to 1.5645

 

Further levels in both directions:

  • Below: 1.5527, 1.5432, 1.5309 and 1.5203
  • Above: 1.5645, 1.5756, 1.5877, 1.6000 and 1.6071

 

OANDA’s Open Positions Ratio

The GBP/USD ratio is showing movement towards short positions in Tuesday trading. This is reflected in the current movement of the pair, as GBP/USD has moved slightly lower. The ratio has a large majority of short positions, which reflects a strong bias in favor of the US dollar posting gains against the pound.

GBP/USD has shown some volatility on Wednesday, as the pair trades in the low-1.55 range. We could see further movement in the North American session as the pair tries to find its footing.

 

GBP/USD Fundamentals

  • CBI Realized Sales. Estimate 19 points. Actual 21 points.
  • 14:00 US Pending Home Sales. Estimate 0.2%.  Actual -1.3%.
  • 14:30 US Crude Oil Inventories. Estimate 0.5M. Actual 3.0M.

 

*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.