GBP/USD – Pound Continues Downward as Services PMI Slides

The pound’s woes continue, as the pair has lost close to 100 points on Tuesday. GBP/USD is trading at the high-1.51 range in the North American session and the pound is now trading at its lowest levels against the dollar since August 2013. On the release front, British Services PMI slipped in December, dropping to 55.8 points. As well, the BOE released its quarterly Credit Conditions Survey. In the US, ISM Non-Manufacturing PMI dropped to 56.2 points, short of expectations.

Soft British PMIs continue to point to weakness in the UK economy. On Tuesday, it was the turn of Services PMI, which slipped to 55.8 points, compared to 58.6 points a month earlier. This was well short of the estimate of 58.9 and marked the index’s worst performance since May 2013. This weak reading follows soft reports from the Manufacturing and Construction PMIs, and is sure to raise concerns about the health of the British economy.

In the US, the ISM Non-Manufacturing PMI,  a key indicator, dropped sharply to 56.2 points in December, its lowest reading in six months. The index was well off the forecast of 58.2 points. On the manufacturing front, there was more bad news as Factory Orders posted a drop of 0.7%, marking a fourth straight decline. This was short of the forecast of -0.3%. This follows a disappointing Manufacturing PMI, which also missed  expectations. There was more bad news from the manufacturing front on Tuesday, as Factory Orders posted a drop of 0.7%, marking a fourth straight decline. This was short of the forecast of -0.3%.

GBP/USD for Tuesday, January 6, 2015

GBP/USD January 6 at 16:00 GMT

GBP/USD 1.5167 H: 1.5274 L: 1.5152

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.4873 1.5008 1.5165 1.5282 1.5392 1.5505

 

  • GBP/USD was flat in the Asian session. The pair posted sharp losses in European trade, testing support at 1.5165. GBP/USD is unchanged in the North American session.
  • On the downside, 1.5165 remains under strong pressure. 1.5008 is stronger.
  • 1.5282 is a strong resistance line.
  • Current range: 1.5165 to 1.5282

Further levels in both directions:

  • Below: 1.5165, 1.5008, 14873 and 1.4781
  • Above: 1.5282, 1.5392, 1.5505, 1.5644 and 1,5717

 

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Tuesday, continuing the direction seen a day earlier. This is consistent with the pair’s movement, as the pound continues to post losses. The ratio has a majority of long positions, indicative of trader bias towards the pound reversing its current slide and moving upwards.

GBP/USD Fundamentals

  • 9:30 British Services PMI. Estimate 58.9 points. Actual 55.8 points.
  • 9:30 British BOE Credit Conditions Survey.
  • 10:35 British 10-year Bond Auction. Actual 1.62%.
  • 14:45 US Final Services. Estimate 53.8 points. Actual 53.3 points.
  • 15:00 US ISM Non-Manufacturing PMI. Estimate 58.2 points. Actual 56.2 points. 
  • 15:00 US Factory Orders. Estimate -0.3%. 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.