GBP/USD – Volatile as US Releases Disappoint Markets

 GBP/USD is showing some volatility in Thursday trading. The pair dropped sharply in the European session, but has since made up those losses, as the pair was trading in the 1.5170 range. Today’s UK data was rather uneventful, but the same cannot be said of US releases, as Unemployment Claims were above the estimate, and Final GDP posted a decline.  Taking a look at British releases, GfK Consumer Confidence continues to look very weak, as the indicator came in at -26 points, a notch above the estimate of -27. Nationwide HPI posted a flat 0.0%, missing the estimate of 0.2%. Index of Services declined 0.2%, matching the forecast. The markets will be closed in the UK on Friday for a holiday.

There has been a lot of talk of the US recovery deepening, but this week has been a disappointment, as economic releases point to continued weakness across a wide range of sectors. The markets had hoped for strong housing numbers this week, but two major housing releases were weak. New Home Sales fell sharply from 437 thousand to 411 thousand, well below expectations. Pending Home Sales also looked weak, declining 0.4%. The forecast stood at -0.3%. The news was no better from Unemployment Claims, which has enjoyed a run of readings that were below expectations. This time around, the key employment indicator hit a five-week high, at 357 thousand news claims. This was way above the estimate of 340 thousand. US Final GDP also missed its estimate, coming in at 0.4%. The estimate stood at 0.5%. The weak US numbers have raised concerns about the health of the US economy, and the markets will be hoping to wrap up the trading week with better news.

After a frantic week of negotiations over a bailout between Cyprus, the EU and the IMF, a bailout agreement was announced on Monday, but the markets remain jittery. The agreement has not brought calm to the small Eurozone member, which has been at the center of a financial crisis over the EUR10 billion bailout. The country’s banks reopened on Thursday, after being closed for business for almost two weeks. Fearing a bank run, the government has imposed strict controls, including limiting withdrawals to 300 euros a day, and a ban on cashing checks. The size of the haircut which will be imposed on accounts of over 100,000 euros is still unknown, and there are rumors that these depositors could lose up to 40% of their savings. The euro has taken a hit over the crisis, dropping over two cents against the dollar this week.

All eyes have recently been focused on Cyprus, one of the Eurozone’s smallest economies. Meanwhile, another crisis continues to percolate in Italy, the zone’s third largest economy. The inconclusive elections have led to a political crisis that is bewildering even by Italian standards. Coalition talks have not made any progress, as the anti-establishment 5-Star Movement has rejected offers from center-left leader Pier Luigi Bersani. Will Italians have to return to the polls? Analysts have noted that Greece also was forced to call new elections recently, and such a move will certainly not increase investor confidence in the Eurozone.

 

GBP/USD for Thursday, March 28, 2013

Forex Rate Graph Thursday, February 14, 2013
GBP/USD March 28 at 14:50 GMT

1.5172 H: 1.5180 L: 1.5112

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.4988 1.5053 1.5138 1.5203 1.5309 1.5392

 

The pound is showing some volatility in Thursday trading. The pair is receiving support at 1.5138. Given the pair’s fluctuation, this line cannot be considered safe. We find stronger resistance at 1.5053. This line is protecting the psychologically important 1.51 level. On the upside, there is resistance just above the 1.52 line, at 1.5203. This is followed by resistance at 1.5309.

  • Current range: 1.5138 to 1.5203

 

Further levels in both directions:

  • Below: 1.5138, 1.5053, 1.4988, 1.4880 and 1.4818
  • Above: 1.5203, 1.5309, 1.5392 and 1.5461

 

OANDA’s Open Positions Ratios

The GBP/USD ratio is not showing any movement in the Thursday session. The currency pair is showing a lot of movement in both directions, with a slight net movement upwards. If the pair continues to move higher, we can expect increased activity in the ratio. The majority of open positions are long, pointing to a bias towards the pound making further inroads against the US currency.

 The British pound has posted modest gains in Thursday trading, after losing ground against the US dollar during the week. With the markets closed in the UK on Friday, we can expect thin trading as we wrap up the trading week.

 

GBP/USD Fundamentals

  • 00:01 British GfK Consumer Confidence. Estimate -27 points. Actual -26 points
  • 7:00 British Nationwide HPI. Estimate 0.2%. Actual 0.0% 
  • 9:30 British Index of Services. Estimate -0.2%. Actual -0.2%
  • 12:30 US Unemployment Claims. Estimate 340K. Actual 357K
  • 12:30 US Final GDP. Estimate 0.5%. Actual 0.4%
  • 12:30 US Final GDP Price Index. Estimate 0.9%. Actual 1.0%
  • 13:45 US Chicago PMI. Estimate 56.5 points. Actual 52.4 points
  • 14:30 US Natural Gas Storage. Estimate -85B. Actual -95B

 

*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.