By Stuart McPhee
The GBP/USD has now returned all of its gains from earlier in the week as it continues to feel selling pressure from the resistance level at 1.6450. After moving well last week getting within reach of 1.6450, the pound finished out last week finding support and settling around the 1.6350 level. A couple of weeks ago, it did well to break through the long-term resistance level at 1.6250 which had established itself as a level of significance over the last few months. Over the last few weeks or so, the pound has bounced strongly off the support level at 1.59 to return back to its present levels. Towards the end of October the GBP/USD slowly drifted lower from the strong resistance level at 1.6250 and down to a three week low just around 1.5900 which was recently passed as the pound moved down towards 1.5850 only a week ago.
For the week or so before that the pound moved well from the key level at 1.60 back up to the significant level at 1.6250, only again for this level to stand tall and fend off buyers for several days. Throughout September, the pound rallied well and surged higher to move back up strongly through numerous levels which was punctuated by a push through to its highest level for the year just above 1.6250 several weeks ago. In the first week of October, the pound was easing back towards 1.60 and 1.59 where it established a narrow trading range between before surging back to 1.6250 again.
Back in the middle of August, the pound surged higher through the resistance level at 1.56 to a then two-month high around 1.5650, before spending the next few days consolidating and trading within a narrow range around 1.5650, receiving support from the key 1.56 level. A couple of months ago, the resistance level at 1.54 was proving to be quite solid, and once it broke through, the pound surged higher to a new seven week high near 1.56 in a solid 48-hour period run. In the week leading up to this, the pound had recovered strongly and returned to the previous resistance level at 1.54 after the week earlier undoing some of its good work and falling away sharply from the resistance level at 1.54 back down to around 1.5150 and a two week low. A few weeks ago, the 1.54 resistance level stood firm and the pound fell away heavily, however, the 1.51 support level proved decisive and helped the pound rally strongly.
Earlier in July after having done very little for about a week, the GBP/USD started to move and surge higher and move through the 1.52 and 1.53 levels to the one-month high above 1.54. Prior to the move higher, it moved very little as it found solid support at 1.51 and traded within a narrow range above this level. It established a trading range in between 1.51 and 1.52 after it took a breather from its excitement just prior when it experienced a strong surge higher moving back to within reach of the 1.52 level from below 1.49, all in 24 hours. About a month ago, it did well to climb off the canvas and move back above 1.49 and towards 1.50 again before seeing the pound reverse and head back down below 1.49 to reach a new multi-year low near 1.48. It experienced sharp falls moving from 1.53 down to the key long-term level of 1.50 and then through 1.49. That movement saw it resume its already well established medium-term downtrend from the second half of June and move it to a four-month low.
The UK economy will finally surpass its pre-recession peak next year, says the British Chambers of Commerce (BCC). The UK's economic output peaked in the first quarter of 2008. The BCC says it expects the economy to surpass that level in the second half of 2014. It also says that the UK's GDP is now set to grow by 2.7% in 2014, an upgrade from a previous prediction of 2.2%. BCC head John Longworth welcomed the improvement but warned that longer-term problems were "still looming." Mr. Longworth said: "It is really great that next year the UK economy is finally expected to bounce back from the deepest recession in modern times." But he added: "As household consumption slows in the medium term, we have to find ways of boosting business investment and exports, as rebalancing our economy is critical to our long-term economic future. "If we make important decisions to fix the long-term structural failure in business finance, continue to deliver a major infrastructure upgrade and do more to support exports, it is possible to achieve not just a good recovery, but a truly great and sustainable economy."
(Daily chart / 4 hourly chart below)
GBP/USD December 12 at 23:30 GMT 1.6342 H: 1.6418 L: 1.6321
During the early hours of the Asian trading session on Friday, the GBP/USD is just easing back away from 1.6350 after falling sharply in the last 12 hours back down to 1.6320. To start this year, the pound fell very strongly from near 1.64 down to below 1.50, however, the second half of the year has seen it recover strongly and move beyond 1.64 to new highs. Current range: Just above 1.6370.
Further levels in both directions:
• Below: 1.6300, 1.6150 and 1.5900.
• Above: 1.6450.
OANDA's Open Position Ratios
(Shows the ratio of long vs. short positions held for the GBP/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)
The GBP/USD long positions ratio has moved back below 30% as the GBP/USD eases back from 1.6450. Trader sentiment remains heavily in favour of short positions.
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