The British pound continues to chip away at the retreating US dollar. The pound crossed above the 1.62 line on Tuesday, and has now gained over two cents against the greenback in less than a week. GBP/USD continues to move higher, despite the releases of a weak British Manufacturing PMI and a strong US ISM Manufacturing PMI on Tuesday. The US dollar is under broad pressure as the US government shutdown has started.
With Congress failing to reach an agreement on the budget before October 1, the US government has begun to shut down non-essential services. This last happened in 1996, and politicians on both sides of the divide will be trying to hammer out a compromise to end the crisis. Both sides seem entrenched in their positions. Republicans want to defund Obamacare before they approve a budget, and the Democrats are determined to protect their health care bill. If things are resolved sometime this week, it will have been more of a nuisance than a crisis. However, a much more serious crisis could occur in two weeks if Congress doesn’t reach an agreement on raising the debt ceiling. If that happens, the Treasury would be unable to pay all of its bills, and the economic fallout could be tremendous.
After a strong run by British PMIs in recent months, Manufacturing PMI missed the estimate on Tuesday. The index dropped from 57.2 to 56.7 points in August, short of the forecast of 57.5 points. This is still a strong reading, and the pound has not lost a step as it continues to rally against the dollar. In the US, ISM Manufacturing PMI jumped to its highest level since April 2011. The index climbed from 54.0 to 56.5 points in August, easily surpassing the estimate of 55.2 points. However, the dollar is under strong pressure from the budget crisis and could not take advantage of this solid release.
GBP/USD for Tuesday, October 1, 2013
GBP/USD October 1 at 13:10 GMT
GBP/USD 1.6187 H: 1.6202 L: 1.6128
- GBP/USD has posted modest gains in Tuesday trading. The pair touched a high of 1.6258 early in the Asian session but has since retracted.
- The pair continues to receive support at 1.6125. This line has some breathing room as the pair trades at higher levels. This is followed by support at the significant round number of 1.6000.
- On the upside, the pair is facing resistance at 1.6231. This is weak line, and could face strong pressure later in the day. This is followed by support at 1.6300, which was last tested in December 2012.
- Current range: 1.6125 to 1.6231
Further levels in both directions:
- Below: 1.6125, 1.6000, 1.5877, 1.5756, 1.5645 and 1.5527
- Above: 1.6231, 1.6300, 1.6421 and 1.6504
OANDA’s Open Positions Ratio
The GBP/USD ratio is pointing to movement towards long positions in Tuesday trading. This is reflected in the pair’s current movement, as the pound has moved higher against the dollar. The ratio is comprised of a majority of short positions, which reflects a bias in favor of the US dollar moving to higher ground.
GBP/USD continues its steady march upwards and has broken above the 1.62 line. We could see some further activity from the pair, as the markets keep a close eye on the continuing budget standoff in Washington.
- 8:30 British Manufacturing PMI. Estimate 57.3 points. Actual 56.7 points.
- 13:00 US Final Manufacturing PMI. Estimate 52.8 points. Actual 52.8 points.
- 14:00 US ISM Manufacturing PMI. Estimate 55.3 points. Actual 56.2 points.
- 14:00 US ISM Manufacturing Prices. Estimate 55.2 points. Actual 56.5 points.
- All Day –US Total Vehicle Sales. Estimate 16.1M.
*Key releases are highlighted in bold
*All release times are GMT
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