GBP/USD – Pound Flirts With 1.70 as US GDP Slides

GBP/USD has shown some movement in both directions on Wednesday, but has been unable to sustain any momentum, as the pair trades in the high-1.69 range. On the release front, US GDP took a tumble in Q1, while durables softened in May. In the UK, CBI Realized Sales took a tumble, dropping to its lowest level since October.

US Final GDP in Q1 was much worse than expected. The markets were braced for a decline of 1.8%, but the indicator shocked with a much sharper drop of 2.9%. The dollar lost ground immediately after the release, and the pound managed to briefly push across the 1.70 level. There was more bad news to follow, as Core Durable Goods Orders declined by 0.1%, its first decline in five months. The estimate stood at 0.3%. Durable Goods Orders looked even worse, coming in at -1.0%, shy of the estimate of -0.1%. Traders should be prepared for the US dollar’s major rivals to gain ground after such a weak GDP release.

US numbers sparkled on Tuesday, as housing and consumer confidence numbers pointed higher. New Home Sales jumped to 504 thousand, crushing the estimate of 442 thousand. It was the key indicator’s best showing since August 2008. CB Consumer Confidence followed suit, improving to 85.2 points, beating the estimate of 83.6 points. It was the strongest level since December 2007. The strong numbers helped the US dollar post some gains against the British pound, but GBP/USD has still jumped about 200 points since the start of June.

Earlier in the week, BOE Governor Mark Carney testified before a parliamentary committee, saying that any rise in interest rates would be “limited and gradual”. Carney seemed to backtrack from unusually candid remarks earlier in June, when he said that the Bank could raise rates earlier than expected by the markets, which led to the pound climbing sharply. With the UK economy looking strong, Carney and his colleagues at the BOE will continue to be under the microscope, as the markets looks for hints about the timing of a rate hike, which could take place before the end of 2014.

GBP/USD for Wednesday, June 25, 2014

GBP/USD June 25 at 15:50 GMT

GBP/USD 1.6982 H: 1.7004 L: 1.6953

GBP/USD Technical

• GBP/USD edged lower in the Asian session but rebounded in European trading, climbing to a high of 1.7004. The pair has edged lower in the North American session.
• 1.6920 is providing support. There is stronger support at 1.6825.
• The key line of 1.70 was breached earlier and is an immediate resistance line. 1.7183 is stronger.
• Current range: 1.6920 to 1.700.

Further levels in both directions:

• Below: 1.6920, 1.6825, 1.6700 and 1.6624
• Above: 1.7000, 1.7183, 1.7228 and 1.7383

OANDA’s Open Positions Ratio

GBP/USD is pointing to gains in long positions on Wednesday, continuing the trend which has marked the pair throughout the week. This is not consistent with what we are seeing from the pair, as the pound is almost unchanged. A significant majority of open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar moving higher.

GBP/USD Fundamentals

• 10:00 British CBI Realized Sales. Estimate 25 points. Actual 4 points.
• 12:30 US Core Durable Goods Orders. Estimate +0.3%. Actual -0.1%.
• 12:30 US Final GDP. Estimate -1.8%. Actual -2.9%.
• 12:30 US Durable Goods Orders. Estimate -0.1%. Actual -1.0%.
• 12:30 US Final GDP Price Index. Estimate 1.3%. Actual 1.3%.
• 13:45 US Flash Services PMI. Estimate 58.6 points. Actual 61.2 points.
• 14:30 US Crude Oil Inventories. Estimate -1.2M. Actual +1.7M.

*Key releases are highlighted in bold

*All release times are GMT

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