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By Kenney Fisher

The British pound continues to point upwards and has crossed above the key 1.60 line in Tuesday trading. The currency got a boost from a superb British Services PMI, which hit its highest level since May 1997. In the US, the week's first key release looked solid, as ISM Non-Manufacturing PMI beat the estimate.

British PMIs have enjoyed an excellent week. Construction PMI climbed to 59.4 points in October, its best reading since September 2007. This was followed by Services PMI on Tuesday, which improved to 62.4 points, compared to 60.3 points the month before. This figure was the best we've seen since May 1997, as the UK services sector continues to improve as each month passes. In the US, the Non-Manufacturing PMI rose from 54.4 points in September to 55.4 points in October. This beat the estimate of 54.2 points.

The Federal Reserve met for a policy meeting last week, the first since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed's policy statement was less dovish than expected, as the Fed noted that the economy was expanding "at a moderate pace" and left the door open for QE tapering in December. However, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.

After a host of weak numbers early in the week, US numbers showed some improvement. Unemployment Claims practically matched the forecast, and ISM Manufacturing PMI beat the estimate. With the Fed unlikely to taper QE before 2014, the QE uncertainty which was has been weighing on the dollar has eased, which could bolster the US dollar.

GBP/USD for Tuesday, November 5, 2013

Forex Rate Graph 21/1/13

GBP/USD November 5 at 15:40 GMT

GBP/USD 1.6032 H: 1.6063 L: 1.5950

GBP/USD Technical

S3S2S1R1R2R3
1.57561.58771.60001.61251.62311.6300
  • GBP/USD continues to post gains in Tuesday trading and crossed above the key 1.60 line early in the European session.
  • On the downside, 1.6000 has reverted to a support role. This line could face pressure if the pound retracts. This is followed by support at 1.5877.
  • The pair is facing resistance at 1.6125. This is followed by a resistance line at 1.6231.
  • Current range: 1.6000 to 1.6125.

Further levels in both directions:

  • Below: 1.6000, 1.5877, 1.5756 and 1.5645 and 1.5537
  • Above: 1.6125, 1.6231, 1.6300 and 1.6476

OANDA's Open Positions Ratio

GBP/USD ratio is pointing to movement towards short positions. This is not reflected in the current movement of the pair, as the pound continues to move higher at the expense of the dollar. Short positions continue to dominate the open positions, reflecting a trader bias towards the US dollar reversing the current trend and moving to higher ground.

The pound continues to push higher, buoyed by an excellent Services PMI. We could see the pair settle down during the North American session and continue to trade in the mid-1.60 range.

GBP/USD Fundamentals

  • 9:30 British Services PMI. Estimate 60.4 points. Actual 62.5 points.
  • 15:00 US ISM Non-Manufacturing PMI. Estimate 54.2 points. Actual 55.4 points.
  • 15:00 US IBD/TIPP Economic Optimism. Estimate 41.1 points. Actual 41.4 points.

*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.

Source: GBP/USD - Pound Pushes Above 1.60 As Services PMI Sparkles