GBP/USD – Pound On A Roll As Services PMI Shines

The British pound continues to rise, buoyed by another excellent PMI release on Wednesday. GBP/USD has pushed across the 1.56 line in the North American session. In the US, Trade Balance did not impress, as the deficit widened in August and missed the estimate.

Another British PMI release, another excellent performance. This has been the recent pattern and this week’s PMIs have been no exception. Earlier in the week, Manufacturing PMI hit a twenty-year high, and Construction PMI posted another gain. On Wednesday, Services PMI made it a clean sweep, soaring to its highest level since December 2006. The index rose from 60.2 to 60.5 points and surpassed the estimate of 59.3 points. The pound reacted positively to the news, and has pushed across the 1.56 level.

The US released its first major event of the week on Tuesday. ISM Manufacturing PMI did not disappoint, climbing to its highest level since May 2011. The index rose to 55.7 points in August, beating the estimate of 54.2. Predictably, the strong figure has increased talk about QE tapering in September. With the Federal Reserve not letting on when it might start tapering QE, the markets are hungry for any news which could affect the timing of QE tapering. US releases, especially employment data, will continue to be scrutinized under the market microscope.

A US military strike against Syria is on hold, but tensions in the Middle East remain high. A military operation had seemed imminent last week, but President Obama announced on the weekend that he will seek Congressional approval before taking any action against Syria. With Congress in recess until September 9th, a military strike could be delayed until mid-September or even later. Russia has warned the US not to take any unilateral action against Syria, so we can expect the volatile situation to continue, bringing with it market volatility.

GBP/USD for Wednesday, September 4, 2013

GBP/USD September 4 at 15:50 GMT

GBP/USD 1.5616 H: 1.5632 L: 1.5556

GBP/USD Technical

• GBP/USD has posted gains in Wednesday trading. The pair crossed above the 1.56 line early in the European session.
• The pair continues to face resistance at 1.5645. This is followed by a resistance line at 1.5756. This line has remained intact since February.
• On the downside, the GBP/USD continues receive support at 1.5527. This is followed by stronger support at 1.5432.
• Current range: 1.5527 to 1.5645

Further levels in both directions:

• Below: 1.5527, 1.5432, 1.5309, 1.5203 and 1.5127.
• Above: 1.5645, 1.5756, 1.5877 and 1.6000

OANDA’s Open Positions Ratio

The GBP/USD ratio is showing little movement in Wednesday trading. This is not reflected in the current movement of the pair, as the pound has pushed higher at the expense of the dollar. The ratio continues to have a solid majority of short positions, which reflects a strong bias in favor of the US dollar posting gains against the pound.

With another strong British PMI, the pound has moved to higher ground. There are no major releases out of the US later in the day, so we could see GBP/USD trade close to the 1.56 during the day.

GBP/USD Fundamentals

• 8:30 British Services PMI. Estimate 59.3 points. Actual 60.5 points.
• 12:30 US Trade Balance. Estimate -38.7B. Actual -39.1B.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 46.2 points. Actual 46.0 points.
• All Day – US Total Vehicle Sales. Estimate 15.8B.
• 18:00 US Beige Book.

*Key releases are highlighted in bold

*All release times are GMT

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