GBP/USD – Pound Remains Below 1.66 in Subdued Trade

The British pound has edged higher on Wednesday, as GBP/USD trades in the high-1.65 range in the North American session. The pound remains close to 5-month lows against the US dollar. Trading has been light on Wednesday, with no major US economic reports on the schedule. There are no releases out of the UK today.

US durables painted a mixed picture on Tuesday. Core Durable Goods Orders, a key indicator, came in at -0.8%, its worst showing in 2014. This was nowhere near the estimate of +0.5%. At the same time, Durable Goods Orders stunned the markets with a record gain of 22.6%. The reason? A huge increase in the purchase of passenger planes in July. Core Durable Goods Orders is considered a more reliable indicator because it excludes volatile data such as these plane purchases.

In Europe, there are hopes for some progress in the Ukraine crisis, as Russian president Vladimir Putin met with his Ukrainian counterpart Petro Poroshenko in Minsk on Tuesday. The meeting was discussed as “positive”, but fighting between Ukrainian forces and pro-Russian militants continues. The crisis has plunged relations between Russia and the West to their lowest levels since the Cold War. Europe and the US have imposed sanctions and Moscow has been quick to retaliate. The impasse could have a significant impact on the economies of Russia and Europe and have a negative effect on global markets.

There was some speculation that the recent economic meeting in Jackson Hole might be a market-mover, so the markets were all ears as Fed chair Janet Yellen delivered the keynote address on Friday. Any hopes for some dramatic news were dashed, however, as Yellen did not provide any clues as to the timing of a rate hike. She reiterated that the US job market still needed to improve, so employment numbers remain a crucial factor in any rate move by the Fed. There is divergence in monetary stance between the ECB on the one hand and the Federal Reserve and Bank of England on the other. The Fed and BoE are expected to raise rates in 2015, while the ECB may have to step in and provide stimulus to bolster the weak Eurozone economy.

GBP/USD for Wednesday, August 27, 2014

GBP/USD August 27 at 15:15 GMT

GBP/USD 1.6582 H: 1.6606 L: 1.6537

GBP/USD Technical

• GBP/USD posted gains late in the Asian session. The upward move continued in European trade, as the pair broke above the 1.66 line. The pair has edged lower in the North American session.
• On the downside, 1.6565 remains under strong pressure and was briefly breached earlier. 16484 is stronger.
• The round number of 1.67 is a strong resistance line.
• Current range: 1.6565 to 1.6700.

Further levels in both directions:

• Below: 1.6565, 1.6484, 1.6382 and 1.6263
• Above: 1.6700, 1.6825, 1.6920 and 1.7000

OANDA’s Open Positions Ratio

GBP/USD is pointing to gains in long positions in Wednesday trade. This is consistent with the movement of the pair, as the pound has posted modest gains. The ratio has a large majority of long positions, indicative of trader bias towards the pound continuing to move to higher ground.

GBP/USD Fundamentals

14:30 US Crude Oil Inventories. Estimate +1.1M. Actual -2.1M.

* Key releases are highlighted in bold

*All release times are GMT

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