GBP/USD - Pound Slips After Recent Gains

 |  Includes: FXB, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

After starting off the week with strong gains, the pound has reversed directions and lost close to one cent in Wednesday trading. GBP/USD is trading in the high-1.63 range in the North American session. On the economic front, it's an uneventful day, with no major releases out of the U.S. on Wednesday. Over in the U.K., the sole event was a speech in London by MPC Member Martin Weale.

In the U.S., last week's employment numbers were excellent, as Unemployment Claims, Non-Farm Payrolls and the Unemployment Rate all impressed. The Fed has said that a stronger employment picture is a prerequisite to QE tapering, and last week's numbers certainly increase the possibility of the Fed taking action at its December policy meeting. Currently, the Fed is purchasing $85 billion in assets every month, and a Fed taper would likely boost the U.S. dollar against the major currencies.

With memories of the October government shutdown still fresh on Capitol Hill, lawmakers have reached a budget deal, which Congress will have to approve. The agreement will remove the risk of a government shutdown and reduce the deficit by a modest $23 billion. Democrats and Republicans both had criticism of the proposal, but there is general agreement in Washington that the compromise reached is a positive step, which removes some of the economic uncertainty we've seen in recent months. Congress must approve a budget, or the U.S. could face another government shutdown in mid-January.

Tuesday was a busy day in the U.K., led by Manufacturing Production. The key indicator fell to 0.4%, down from 1.2% the previous month. However, this reading was good enough to match the forecast. The trade deficit showed little change, coming in at -9.7 billion pounds, but this disappointed the markets, which had anticipated a smaller deficit of -9.3 billion. There was some better news from NIESR GDP, a monthly indicator which helps analysts track GDP, which is only released each quarter. The indicator posted gain of 0.8%, slightly up from the previous release of 0.7%. The solid figure points to a U.K. economy which is on the move and picking up steam.

GBP/USD for Wednesday, December 11, 2013

Forex Rate Graph 21/1/13

GBP/USD December 11 at 16:30 GMT

GBP/USD 1.6378 H: 1.6457 L: 1.6340

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6125 1.6231 1.6300 1.6476 1.6600 1.6696
Click to enlarge
  • GBP/USD has posted sharp losses in Wednesday trading. The pound has been under pressure since the European session, and touched a low of 1.6340 early in the North American session.
  • The round number of 1.6300 continues to provide support. This is followed by a support level at 1.6231.
  • On the upside, the pair faces resistance at 1.6476. Given the strong start by the pound this week, this line cannot be considered safe. This is followed by resistance at the round number of 1.6600, which has remained intact since August 2011.
  • Current range: 1.6300 to 1.6476

OANDA's Open Positions Ratio

GBP/USD ratio has reversed positions in Wednesday trading, pointing to gains in short positions. This is reflected in the pair's current movement, as the pound has lost ground against the dollar. Short positions continue to dominate the ratio, reflecting a trader bias towards the U.S. dollar continuing to gain ground against the U.S. dollar.

The pound has posted sharp losses in Wednesday trading and GBP/USD is showing some volatility early in the North American session.

GBP/USD Fundamentals

  • 00:01 British RICS House Price Balance. Actual 58%.
  • 9:30 British Manufacturing Production. Estimate 0.4%. Actual 0.4%.
  • 9:30 British Trade Balance. Estimate -9.3B. Actual -9.7B.
  • 9:30 British Industrial Production. Estimate 0.4%. Actual 0.4%
  • 12:30 U.S. NFIB Small Business Index. Estimate 92.7 points.
  • 15:00 U.S. JOLTS Openings. Estimate 3.96M. Actual 3.93M.
  • 15:00 U.S. Wholesale Inventories. Estimate 0.3%. Actual 1.4%.
  • 15:00 British NIESR GDP Estimate. Actual 0.8%.

*Key releases are highlighted in bold

*All release times are GMT

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