GBP/USD – Pound Pushes Above 1.60 After Strong UK Sales Data

GBP/USD has rebounded from Tuesday’s losses and has crossed back above the significant 1.60 level. In Wednesday’s European session, the pair is trading in the mid-1.60 range. The pound received a boost from an excellent CBI Realized Sales release, which jumped to a fifteen-month high in August. In economic news, US CB Consumer Confidence was well short of the estimate for the August release. Later today, the US releases two key events – Core Durable Goods Orders and New Home Sales. The markets are expecting both releases to improve, which would be bullish for the US dollar.

In the US, the first key release of the week was a disappointment. CB Consumer Confidence dropped from 81.5 to 79.7 points in August, shy of the estimate of 79.9 points. It was the first time the indicator has dropped below the 80-point level since May. There was more bad news in the manufacturing sector, as the Richmond Manufacturing Index plunged from 14 points down to zero in August. This surprised the markets, which had expected a reading of 17 points. The markets will be looking for a turnaround from additional manufacturing data on Wednesday, with the release of Core Durable Goods Orders and Durable Goods Orders.

The markets have settled down after the US Federal Reserve stunned the markets in deciding not to taper QE at its policy meeting last week. Most analysts had expected the Fed to announce a scaling down of the present bond-buying program of $85 billion/mth by $10-15 billion. However, the Fed was of the opinion that US economic data, particularly employment numbers, did not justify scaling down QE at this time. After the FOMC Statement, Federal Reserve Bank of St. Louis President James Bullard shed some light on the dramatic move (or lack of) by the Federal Reserve. Bullard said the vote was close, but weaker US numbers led to a decision not to taper. He added that the Fed may go ahead with “small” reductions to QE at its next policy meeting in October.

As British releases continue to look solid, and there was more positive news as CBI Realized Sales jumped from 27 to 34 points, its best showing since May 2012. The strong reading easily surpassed the estimate of 24 points. Meanwhile, the Bank of England is expressing cautious optimism about the UK economy. The BOE said that the recovery is “taking hold” and has increased its growth forecast for this quarter from 0.5% to 0.7%. On Monday, Monetary Policy Committee member Ben Broadbent reiterated this sentiment and noted that recent economic data had been strong. The pound has enjoyed a terrific September, gaining around five cents against the US dollar this month.

GBP/USD for Wednesday, September 25, 2013

GBP/USD September 25 at 11:50 GMT

GBP/USD 1.6042 H: 1.6056 L: 1.5980

GBP/USD Technical

• GBP/USD has strengthened in Wednesday trading. The pair barreled past the 1.60 level in the European session.
• The pair is receiving support at 1.6000. This followed by a stronger support level at 1.5877.
• On the upside, the pair is facing resistance at the round number of 1.6125. This line has remained intact since December 2012. The next resistance line is at 1.6231.
• Current range: 1.6000 to 1.6125

Further levels in both directions:

• Below: 1.6000, 1.5877, 1.5756, 1.5645 and 1.5527
• Above: 1.6125, 1.6231, 1.6300 and 1.6421

OANDA’s Open Positions Ratio

The GBP/USD ratio continues to point towards short positions in Wednesday trading. This is not reflected in the pair’s current movement, as the pound has posted gains against the US dollar. The ratio is comprised of a majority of short positions, which reflects a strong bias in favor of the US dollar reversing direction and moving to higher ground.

The pound has rebounded and crossed back above the 1.60 line. Will it continue to move higher? With the US releasing key manufacturing and housing data later in the day, we could see some volatility from the pair during the North American session.

GBP/USD Fundamentals

• 10:00 British CBI Realized Sales. Estimate 24 points. Actual 34 points.
• 12:30 US Core Durable Goods Orders. Estimate 1.1%.
• 12:30 US Durable Goods Orders. Estimate 0.0%.
• 14:00 US New Home Sales. Estimate 422K.
• 14:30 US Crude Oil Inventories. Estimate -1.0M.

*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.