GBP/USD – Volatile as UK, US PMIs Soften

GBP/USD is showing strong movement on Wednesday, as the pair is trading in the mid-1.59 range in  North American trade. On the release front, British Services PMI slid in September, falling to 56.2 points. In the US, ISM Non-Manufacturing PMI softened with a reading of 57.1 points. ADP Nonfarm Employment Change, a key employment event, climbed to 230 thousand, well above expectations.

The British pound has been on a roller-coaster ride on Wednesday, showing sharp losses and then recovering. GBP/USD dropped as British Services PMI dropped to 56.2 points, below expectations and its lowest level since May 2013. The pair recovered as the US Non-Manufacturing PMI also weakened, with a reading of 57.1 points. This marked a four-month low, although the indicator continues to point to expansion.

On Tuesday, British Construction PMI disappointed, slipping to 61.4 points, compared to 63.5 points in the previous release. The estimate stood at 63.5 points. The October reading still points to strong expansion in the construction sector, as the 50 level separates between expansion and contraction. On Monday, there was better news as Manufacturing PMI improved to 53.2 points, easily beating the estimate of 51.5 points.

US job numbers have been solid in recent readings, and the trend continued on Wednesday with an excellent performance from ADP Nonfarm Payrolls. The key indicator climbed to 230 thousand, easily beating the estimate of 214 thousand. This marked the indicator’s strongest showing in 2014. We’ll get a look at Unemployment Claims and the official Nonfarm Payrolls later in the week.

 

GBP/USD for Wednesday, November 5, 2014

GBP/USD November 5 at 16:55 GMT

GBP/USD 1.5976 H: 1.6022 L: 1.5869

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.5644 1.5717 1.5864 1.6000 1.6141 1.6263

 

  • GBP/USD has been volatile but has shown little net movement over the course of the day. The pair posted sharp losses in the Asian session and this trend continued early in European trade. The pair then reversed directions in the European and North American sessions and has recovered most of the losses sustained earlier.
  • 15864 continues to provide strong support, but was under strong pressure earlier as the pound dropped sharply before rebounding.
  • On the upside, the round number of 1.6000 was tested and is under strong pressure. 1.6141 is stronger.
  • Current range: 1.5864 to 1.6000

Further levels in both directions:

  • Below: 1.5864, 1.5717, 1.5644 and 1.5505
  • Above: 1.6000, 1.6141, 1.6263, 1.6382 and 1.6524

 

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Wednesday. This is consistent with the pair’s movement, as the pound has posted small losses on the day. The ratio is pointing to a majority of long positions, indicative of trader bias towards the pound moving higher.

 

GBP/USD Fundamentals

  • 9:30 British Services PMI. Estimate 58.5 points. Actual 56.2 points.
  • 13:15 US ADP Non-Farm Employment Change. Estimate 214K. Actual 230K
  • 14:15 US FOMC Member Narayana Kocherlakota Speaks.
  • 14:45 US Final Services PMI. Estimate 57.3 points. Actual 57.1 points.
  • 15:00 US ISM Non-Manufacturing PMI. Estimate 58.2 points.
  • 15:30 US Crude Oil Inventories. Estimate 1.8M. Actual 0.5M.

* Key releases are in highlighted 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.