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GBP/USD – Pound Drops to 1.24 on Profit Taking, US GDP Next

GBP/USD has posted losses in the Monday session, as the post-Thanksgiving period has been marked by profit trading at the expense of the dollar. In North American trade, the pair is trading at the 1.24 line. On the release front, it’s a quiet start to the week, with no events in Britain or the US. On Tuesday the US will release Preliminary GDP for the third quarter, with the markets expecting a sharp gain of 3.0%. The other key indicator is CB Consumer Confidence, which is expected to improve to 101.3 points.

Dollar Succumbs to Profit Taking Ahead of Event Risks [1]

The British pound has taken a sharp hit since the Brexit vote in June, losing over 16 percent against the dollar. However, British data has been respectable since June, often beating expectations. With the economy in good shape, the BoE held rates earlier this month, and Mark Carney acknowledged that the bank had been overly pessimistic about fallout from the Brexit vote. However, negotiations with the European Union are yet to begin and many European leaders are already taking a tough stance. Last week, Maltese Premier Joseph Muscat said that the EU will insist on Britain paying a “departure payment” before trade negotiations even begin. British ministers have said post-Brexit, Britain will be able to enjoy unfettered access to European markets while restricting immigration into the UK. This claim has irked European leaders, who insist that Britain cannot cherry pick and enjoy free trade with the continent while implementing its own immigration policy.

Talks on Final Brexit Deal Will Have to Wait [2]

The US economy continues to improve and consumer confidence has been an important factor, as higher confidence levels usually translate into increased consumer spending. Last week, UoM Consumer Sentiment jumped to 93.8 points, beating the forecast of 91.6 points. This reading was the indicator’s highest level since May. CB Consumer Confidence follows on Tuesday and is expected to follow suit with a higher reading for November.

The Federal Reserve appears poised to raise interest rates by a quarter-point in December, with the odds of a rate hike at 93 percent. The Fed minutes were released on Thursday, indicating that policymakers felt it appropriate to raise rates “relatively soon”. Earlier this month, Fed Chair Janet Yellen used the same phrase in her testimony before a congressional committee. The minutes indicated that some members argued that the Fed needs to raise rates in December in order to preserve the bank’s credibility – despite some broad hints of rate hikes during 2016, the Fed has stayed on the sidelines throughout 2016, causing significant disappointment and frustration in the markets.

GBP/USD Fundamentals

Monday (November 28)

Tuesday (November 29)

*All release times are EST

* Key events are in bold

GBP/USD for Monday, November 28, 2016

GBP/USD November 28 at 10:40 EST

Open: 1.2479 High: 1.2531 Low: 1.2383 Close: 1.2407

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2120 1.2272 1.2351 1.2479 1.2620 1.2778

Further levels in both directions:

OANDA’s Open Positions Ratio

In the Monday session, GBP/USD ratio is showing long positions with a majority (62%). This is indicative of trader bias towards GBP/USD reversing directions and gaining ground.

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 [6]

Market Analyst at OANDA [7]
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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