GBP/USD – Little Movement in Thin Holiday Trade

The pound is enjoying a quiet day, as GBP/USD is trading in the mid-1.51 range. Trading is light today, as US markets are closed for the Martin Luther King holiday. There are no British releases on Monday.

US employment numbers slipped on Thursday, as Unemployment Claims surprised with a reading of 316 thousand. This was well above the estimate of 299 thousand and was the highest reading since June 2014. However, the first full week of the year often shows a spike in claims, since holiday workers are dismissed, resulting in a higher number of claims. Earlier in the week, JOLTS Jobs Openings climbed to 4.97 million, easily beating the forecast of 4.86 million. This is the indicator’s highest level since January 2001. The strong employment numbers are a welcome result of the robust economy, as the deepening recovery fuels demand for more workers. The health of the labor market is an important component of any decision to raise interest rates, so upcoming employment releases will be under the market microscope as the Fed mulls when to raise interest rates.

Currency markets were in shock on Thursday, as the Swiss National Bank abruptly abandoned its cap on the exchange rate between the euro and the franc, which had a floor of 1.20 for EUR/CHF. The cap had been in place since 2011, and the move marks a major policy reversal for the normally conservative Swiss central bank. Market reaction was swift, as the euro dropped some 15% against the franc, as the pair is currently trading at parity.

What was the reasoning behind the SNB bombshell? One answer is an attempt to fight deflation, which is hurting the Swiss economy. As well, with the euro losing value, the SNB has had to increase its euro purchases to keep EUR/CHF within the cap, and the SNB may have finally soured on the common currency. The stunning move indicates that the SNB believes that the ECB will implement quantitative easing at its policy meeting on Thursday and didn’t want to continue propping up the ailing common currency, which will likely lose ground after a QE move.

GBP/USD for Monday, January 19, 2015

GBP/USD January 19 at 16:30 GMT

GBP/USD 1.5145 H: 1.5178 L: 1.5129

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.4781 1.4873 1.5008 1.5165 1.5282 1.5392

 

  • GBP/USD has shown limited movement during the day. The pair has tested resistance at 1.5165 but has not been able to consolidate above this line.
  • 1.5165 is a weak resistance line and remains under pressure. 1.5282 is stronger.
  • 1.5008 is a strong support level. It is protecting the symbolic 1.50 line.
  • Current range: 1.5008 to 1.5165

Further levels in both directions:

  • Below: 1.5008, 14873, 1.4781 and 1.4670
  • Above: 1.5165, 1.5282, 1.5392, 1.5505 and 1.5644

 

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Monday. This is not consistent with the lack of movement we’re seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards the pound moving upwards.

GBP/USD Fundamentals

  • There are no UK or US releases on Monday.

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.