GBP/USD – Steady As Markets Eye Nonfarm Payrolls

The British pound has posted slight gains on Friday, as the pair trades in the mid-1.67 range. The pound is having a good week, adding about 100 points. In economic news, Consumer Inflation Expectations dropped below the 3% level for the first time in almost four years. It’s a busy day in the US, with three key events on the schedule – Nonfarm Payrolls, the Unemployment Rate and Trade Balance.

In the US, all eyes are on Nonfarm Payrolls, which will be released together with the Unemployment Rate later on Friday. US employment numbers have been a mix so far this week, as ADP Nonfarm Payrolls was well below the estimate, but Unemployment Claims dropped to its lowest level since December. Even if today’s numbers aren’t great, we can expect the Fed to take the scissors and trim QE at its meeting next week.  New York Fed President William Dudley said as much on Thursday when he stated that the threshold to alter the Fed’s program to wind up QE was “pretty high”. In other words, short of a serious economic downturn in the US economy, we can expect the QE tapers to continue.

It’s not only soft US employment numbers that are raising concerns about the health of the US economy. ISM Non-Manufacturing PMI dropped in January and missed the estimate. GDP also weakened in February, and recent housing numbers have not impressed. The US dollar continues to make inroads at the expense of the Japanese yen, but this trend could end if the markets don’t see better numbers from the US economy.

The Bank of England didn’t have any surprises up its sleeve, making no changes to interest rates or QE. The Official Bank Rate stays at 0.50%, where it has been pegged since February 2009. The BOE’s quantitative easing program remains at 375 billion pounds, unchanged since June 2012. Meanwhile, Halifax HPI surprised with a sharp gain of 2.4%, easily beating the estimate of 0.6%. This was its best showing since May 2009. The index is an important gauge of activity in the UK housing sector.

GBP/USD for Friday, March 7, 2014

GBP/USD March 7 at 11:45 GMT

GBP/USD 1.6770 H: 1.6777 L: 1.6722

GBP/USD Technical

• GBP/USD has edged higher in Friday trading. The pair dropped to a low of 1.6722 early in the European session but has since bounced higher.
• 1.6765 has switched to a support role, but remains under pressure. This is followed by a strong support level at 1.6549.
• On the upside, 1.6896 is the next line of resistance. Next, there is resistance above the key 1.70 line, at 1.7087.
• Current range: 1.6896 to 1.6964.

Further levels in both directions:

• Below: 1.6765, 1.6705, 1.6549, 1.6416 and 1.6329
• Above: 1.6896, 1.6964, 1.7087 and 1.7192

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Friday, reversing its direction from the previous day. This is not consistent with the pair’s current move, as the pound has edged higher against the US dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing direction and moving to higher ground.

GBP/USD has moved higher in the European session, as the dollar remains under pressure.

GBP/USD Fundamentals

• 9:30 British Consumer Inflation Expectations. Actual 2.8%.
• 13:30 US Nonfarm Employment Change. Estimate 151K.
• 13:30 US Trade Balance. Estimate -39.1B.
• 13:30 US Unemployment Rate. Estimate 6.6%.
• 13:30 US Average Hourly Earnings. Estimate 0.2%.
• 17:00 US FOMC Member William Dudley Speaks.
• 18:00 US Consumer Credit. Estimate 14.6B.

*Key releases are highlighted in bold

*All release times are GMT

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