GBP/USD – Pound Posts Gains in Subdued Holiday Trade

The British pound is firm on Monday, as GBP/USD trades in the high-1.65 range in the North American session. August has not treated the pound kindly, as the pound has lost about 300 points to the US dollar. On the release front, it’s a quiet start to the week. Today’s highlight was US New Home Sales, which slipped to 412 thousand, well below the estimate. There are no British releases on Monday, as the UK markets are closed for a bank holiday.

The week started off on a disappointing note, as US New Home Sales dropped to 412 thousand, down from 422 thousand a month earlier (the latter figure was revised from 406 thousand). This was well off the estimate of 426 thousand. There was stronger housing data last week, as Housing Starts hit an 8-month high. We’ll get another look at key housing numbers on Thursday, with the release of Pending Home Sales.

Financial leaders and central bankers met at Jackson Hole for a conference, and the markets were all ears as Fed chair Janet Yellen delivered the keynote address on Friday. Any hopes for some dramatic news were dashed, as Yellen did not provide any clues as to the timing of a rate hike. She reiterated that the US job market still needed to improve, so employment numbers remain a crucial factor in any rate move by the Fed. There is a divergence in monetary stance between the ECB  on the one hand, and the Fed and the BOE on the other. The markets are expecting the Fed and BOE to tighten monetary policy sometime in 2015, while the ECB may be forced to provide stimulus to prop up the sagging Eurozone economy.

US releases wrapped up the week on a high note. Unemployment Claims improved to 298 thousand, lower than the estimate of 302 thousand. The key indicator has now beaten the estimate in six of the past seven readings. Thursday’s other key event, the Philly Fed Manufacturing Index, shot higher in July, rising to 28.0 points. The markets had expected the indicator to slip to 19.7 points. There was more good news on the housing front, as Existing Home Sales improved to 5.15 million, well above the estimate of 5.01 million. This marked the highest level we’ve since September 2013. What is particularly encouraging is that the data stems from a wide range of sectors, which points to balanced economic growth.

GBP/USD for Monday, August 25, 2014

GBP/USD August 25 at 16:25 GMT

GBP/USD 1.6582 H: 1.6599 L: 1.6546

GBP/USD Technical

• GBP/USD edged higher in the Asian session and this continued in the European session, as the pair touched a high of 1.6599. GBP/USD is almost unchanged in North American trade.
• 1.6700 is a strong resistance line.
• On the downside, 1.6565 remains under strong pressure and saw action earlier in the day. 16484 is stronger.
• Current range: 1.6565 to 1.6700.

Further levels in both directions:

• Below: 1.6565, 1.6484 and 1.6382
• Above: 1.6700, 1.6825, 1.6920 and 1.7000

OANDA’s Open Positions Ratio

GBP/USD is unchanged in Monday trade, continuing the trend we saw on Friday. This is not consistent with the movement of the pair, as the pound has posted slight gains. The ratio has a large majority of long positions, indicative of trader bias towards the pound continuing to move to higher ground.

GBP/USD Fundamentals

• 13:45 US Flash Services PMI. Estimate 59.2 points. Actual 58.5 points.
• 14:00 US New Home Sales. Estimate 412K. Actual 426K.

* 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.