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GBP/USD – Sharp Gains As US Housing Data Slips

The British pound has shot higher to begin the new week. GBP/USD has gained about 100 points on Monday, as the pair trades in the high-1.65 range in the North American session. In economic news, US New Home Sales took a tumble, and the pound took full advantage. There are no British releases on Monday.

The health of the US housing sector continues to concern the markets, as New Home Sales dropped sharply in December to 414 thousand, down from 464 thousand a month earlier. This was nowhere near the estimate of 457 thousand. This follows a disappointing Existing Home Sales release last week. The key indicator dropped to 4.87 million, down from 4.90 million a month earlier and shy of the estimate of the 4.94 million. This was the indicator’s fourth straight drop. The markets will be hoping for better news from Pending Home Sales on Thursday.

The UK Unemployment Rate dropped to 7.1% in December, down from 7.4% a month earlier. The strong reading was welcomed by the markets, as the BOE has previously stated that the 7.0% unemployment level was a threshold at which it would consider raising interest rates, which currently are at 0.50%. However, the market excitement is likely premature, as the BOE has recently noted that the 7.0% threshold would by no means trigger a rate increase. Last week’s BOE minutes noted that the 7.0% level would likely be reached earlier than anticipated, but this did not mean that the BOE would immediately respond with a rate hike. Nonetheless, the pound shot after the unemployment rate release, and there’s little doubt that the Bank is under increased pressure to raise interest rates.

 

GBP/USD for Monday, January 27, 2014

Forex Rate Graph 21/1/13

GBP/USD January 27 at 16:20 GMT

GBP/USD 1.6677 H: 1.6687 L: 1.6579

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6329 1.6416 1.6549 1.6705 1.6964 1.7182

 

 

Further levels in both directions:

 

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Monday trading. This is consistent with the pair’s movement, as the pound has posted sharp gains. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing its downward move.

The pound continues to show strong activity and has recovered most of the losses sustained on Friday. GBP has steadied in the North American session after strong gains in European trading.

 

GBP/USD Fundamentals

 

*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 [4]

Market Analyst at OANDA [5]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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