GBP/USD – Pound Steady After Recent Slide

The British pound has steadied on Wednesday, after losing over one cent in the previous two days. In Wednesday’s North American session, the pair is trading in the mid-1.60 range. In economic news, ADP Non-Farm Payrolls slumped to an six-month low, as US employment numbers continue to disappoint. The Federal Reserve will release a statement later today, so we could see some movement from GBP/USD. There are no British releases on Wednesday.

The Federal Reserve winds up a policy meeting on Wednesday, its first since Congress hammered out an agreement on the debt ceiling and reopened the government. However, the agreement is little more than a band-aid solution which has pushed off the debt ceiling and budget deadlock for a few months, without resolving these two issues. Meanwhile, recent US data, notably employment numbers, have been sluggish. Given this situation, the Fed is unlikely to push the taper trigger until early 2014. The markets will be waiting for the Fed policy statement later today, and we could see some volatility in the currency markets afterwards.

US employment numbers continue to sag, and the bad news continued on Wednesday with the ADP Non-Farm Payrolls report.  The key indicator tumbled from 166 to 130 thousand, way off the estimate of 151 thousand. This was the weakest reading since April and points to a weak labor market. Last week, Unemployment Claims came in above the estimate and Non-Farm Payrolls tumbled to a six-month low.

In the US, the weak readings continued on Tuesday. PPI and Retail Sales both declined by 0.1%, missing the estimate of 0.2%. CB Consumer Confidence dropped sharply, from 79.7 to 71.2 points, a six-month low. This was well short of the estimate of 75.7 points. Core Retail Sales managed to match the forecast, rising to 0.4%. The mostly weak figures come on the heels of dismal housing numbers on Monday. If confidence in the US economy starts to weaken, we could see the dollar, which is already under pressure from the major currencies, continue to lose ground.

 

GBP/USD for Wednesday, October 30, 2013

Forex Rate Graph 21/1/13

GBP/USD October 30 at 16:00 GMT

GBP/USD 1.6073 H: 1.6078 L: 1.6024

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5756 1.5877 1.6000 1.6125 1.6231 1.6300

 

  • GBP/USD has steadied in Wednesday trading, posting modest gains against the dollar.
  • GBP/USD continues to face resistance at 1.6125. This is followed by resistance at 1.6231, which as strengthened as the pair trades at lower levels.
  • On the downside, there is support at the round number of 1.6000. This is followed by a support level at 1.5877.
  • Current range: 1.600 to 1.6125.

 

Further levels in both directions:

  • Below: 1.6000, 1.5877, 1.5756 and 1.5645
  • Above: 1.6125, 1.6231, 1.6300, 1.6421 and 1.6512

 

OANDA’s Open Positions Ratio

GBP/USD ratio has reversed positions on Wednesday and is pointing to movement towards long positions. This is consistent with the movement of the pair, as the pound has posted gains against the dollar. Short positions continue to dominate the open positions, reflecting a trader bias towards the US dollar moving to higher ground.

After its recent slide, the pound has steadied on Wednesday. We could see some movement from GBP/USD following the release of the Federal Reserve Policy Statement later in the day.

 

GBP/USD Fundamentals

  • 12:15 US ADP Non-Farm Employment Change. Estimate 151K. Actual 130K.
  • 12:30 US Core CPI. Estimate 0.2%. Actual 0.1%.
  • 12:30 US CPI. Estimate 0.2%. Actual 0.2%.
  • 14:30 US Crude Oil Inventories. Estimate 1.9M.
  • 18:00 US FOMC Statement.
  • 18:00 US Federal Funds Rate. Estimate <0.25%.

 

*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.