GBP/USD – Pound Dips Below 1.66 As Markets Eye US Employment Numbers

The GBP/USD has edged lower in Friday, as the pound remains under pressure. The pair is trading in the high-1.65 range in the European session. In economic news, Halifax HPI disappointed, posting its sharpest decline in almost two years. Today’s highlight is US Non-farm Payrolls, which is often a market-mover.

It was not a great week for British releases. On Friday, Halifax HPI declined by 1.1%, nowhere close to the estimate of a 0.7% gain. This release is an important indicator of housing activity as well as consumer spending. British PMIs, which are important gauges of the health of the UK economy, all missed their forecasts. On Thursday, Services PMI dropped for a fifth straight month, coming in at 57.6 points. This was short of the estimate of 58.2 points. The good news is that the PMIs continue to point to expansion, as all three remain well above the 50-point level. Still, if key British indicators continue to miss expectations, the pound could hit more turbulence.

In the US, we’ll get a further look at the employment picture, with the release of Non-Farm Payrolls and the Unemployment Rate. The markets are expecting good news from Non-Farm Payrolls, with an estimate of 199 thousand. Unemployment Claims disappointed on Thursday, as the key indicator jumped to 326 thousand last week, up from 311 thousand in the previous release. This missed the estimate of 319 thousand. Earlier in the week, ADP Nonfarm Payrolls jumped to 191 thousand, up from 139 thousand a month earlier. This practically matched the estimate of 192 thousand.

Over in the US, Fed chair Janet Yellen surprised the markets with unexpectedly dovish comments about the economy. Yellen noted that inflation and employment levels need to improve considerably, and the Federal Reserve would continue to provide monetary stimulus for some time. Currently, the Fed is purchasing $55 billion in assets under its QE scheme. There have been three tapers to QE so far, and Yellen plans to wind up the program in the fall, provided that the US economy does not run into any serious turbulence. At the same time, the Federal Reserve has stated that it has no plans to raise interest rates until sometime in 2015.

 

GBP/USD for Friday, April 4, 2014

Forex Rate Graph 21/1/13

GBP/USD April 4 at 11:35 GMT

GBP/USD 1.6578 H: 1.6599 L: 1.6567

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6329 1.6416 1.6549 1.6705 1.6765 1.6896

 

  • GBP/USD continues to point downwards on Friday. The pair touched a high of 1.6599 early in the Asian session.
  • On the downside, 1.6549 is providing support. This line continues to weaken as the pound loses ground.
  • 1.6705 is a strong resistance line.

 

Further levels in both directions:

  • Below: 1.6549, 1.6416, 1.6329, 1.6236 and 1.6146
  • Above: 1.6705, 1.6765, 1.6896 and 1.6964

 

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Friday, reversing the direction we saw a day earlier. This is not consistent with what we are seeing from the pair, as the pound continues to lose ground. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to make inroads against the pound.

The pound remains under pressure as it trades below the 1.66 line. We could see stronger activity from the pair in the North American session, as the US releases Non-farm Payrolls.

 

GBP/USD Fundamentals

  • 6:58 British Halifax HPI. Estimate 0.7%. Actual -1.1%.
  • 12:30 US Non-Farm Employment Change. Estimate 199K.
  • 12:30 US Unemployment Rate. Estimate 6.6%.
  • 12:30 US Average Hourly Earnings. Estimate 0.2%.

*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.