GBP/USD – Steady as British GDP Remains Strong

GBP/USD is stable on Friday, as the pair trades slightly below the 1.70 line. The pound has given up about 150 points in little over a week. On the release front, UK Preliminary GDP posted another strong gain, climbing 0.8% in Q2. Over in the US, Core Durable Goods posted a strong gain of 0.8%, marking a three-month high.

British GDP, one of the most important economic indicators, has proven to be steady and reliable, and the key indicator was true to form, posting a healthy gain of 0.8% in Q1. This figure matched the forecast as well as the previous release. Earlier in the week, consumer spending indicators sent mixed signals. British Retail Sales improved to 0.1% in June, compared to -0.5% in the previous release. This was shy of the estimate of 0.2%. On a brighter note, CBI Realized Sales, which tends to show sharp movement, jumped to 21 points, compared to a previous reading of just 4 points. The estimate stood at 18 points, and was the indicator’s best showing since March. Despite this week’s encouraging numbers, the pound continues to point downwards, and has fallen to four-week lows against the US dollar.

Over in the US, Unemployment Claims tumbled last week, as the key indicator fell to 284 thousand, its lowest level since February 2008. This surprised the markets, which had expected a reading of 310 thousand. The strong release continues a string of solid employment data, which has helped the dollar. As well, positive news on the employment front is bound to increase speculation about a rate increase by the Federal Reserve.

US housing data was dismal on Thursday, as New Home Sales slumped to a three-month low. The key indicator fell to 406 thousand, compared to 504 thousand in the previous release. The markets were way off in their forecast, with an estimate of 485 thousand. There was much better news earlier in the week, as Existing Home Sales jumped to 5.04 million, surpassing the estimate of 4.94 million. This was the best showing we’ve seen since October.

 

GBP/USD for Friday, July 25, 2014

GBP/USD July 25 at 14:00 GMT

GBP/USD 1.6993 H: 1.6998 L: 1.6962

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6700 1.6825 1.6920 1.7000 1.7183 1.7228

 

  • GBP/USD edged lower in the Asian session but reversed direction in European trading. The pair is steady in North American trading.
  • 1.6920 continues to provide support to the pair.
  • On the upside, 1.7000 is fluid. Will the pair break above this key level? 1.7183 is stronger.
  • Current range: 1.6920 to 1.7000.

Further levels in both directions:

  • Below: 1.6920, 1.6825, 1.6700 and 1.6556
  • Above: 1.7000, 1.7183, 1.7228 and 1.7383

 

OANDA’s Open Positions Ratio

GBP/USD is pointing to gains in long positions in Friday trade, continuing the direction which has marked the ratio for most of the week. This is not consistent with the movement of the pair, as the pound is showing little movement. A substantial majority of open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar resuming its upward movement.

GBP/USD Fundamentals

  • 8:30 British Preliminary GDP. Estimate 0.8%. Actual 0.8%.
  • 8:30 British Index of Services. Estimate 1.0%. Actual 1.0%.
  • 12:30 US Core Durable Goods Orders. Estimate 0.6%. Actual 0.8%
  • 12:30 US Durable Goods Orders. Estimate 0.4%. Actual 0.7%.

* 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.