Seeking Alpha
Currencies, macro, fixed income
Profile| Send Message|
( followers)  

By Kenny Fisher

GBP/USD has reversed directions in Tuesday trading, as the pair has pushed higher and crossed above the 1.64 line. In economic news, most UK inflation indicators were within market expectations, led by CPI, which posted a gain of 2.0% in December. In economic news, US Retail Sales dropped in December, while Core Retail Sales improved and beat the estimate.

Earlier on Tuesday, the UK released a host of December inflation indicators, and most of the releases were very close to the estimates. CPI, the most important inflation indicator, came in at 2.0%, almost unchanged from 2.1% in November. The estimate stood at 2.1%. The reading dovetails with the Bank of England's inflation target of 2.0%. CPI has been dropping in recent readings, and this puts less pressure on the Bank of England to raise interest hikes in response to the improving UK economy.

US employment numbers started 2014 on a positive note, but Friday’s Non-Farm Payrolls was dismal, posting its lowest gain since May 2012. The key employment indicator dropped to just 74 thousand, down from 203 thousand a month earlier. This was nowhere near the estimate of 196 thousand. Although the unemployment rate dropped to 6.7%, this was due to a drop in the participation rate, which fell to 62.8%, its lowest level since 1978. This figure points to a worrying trend of a jobless US recovery.

Friday's disappointing Non-Farm Payrolls report may create some concern in the markets, but is unlikely to change the Federal Reserve's path of tapering QE, which it started just this month. In December, outgoing Fed chair Bernard Bernanke strong hinted that the Fed planned to wind up QE by the end of 2014, reducing the asset-purchase program by increments of $10 billion at each meeting. The Fed next meets for a policy meeting on January 28, and the question is will the Fed reduce QE by another $10 billion, down to $65 billion each month. Most analysts feel that one bad employment report will not affect the taper schedule and we will see a reduction in QE at the next meeting.

GBP/USD for Tuesday, January 14, 2014

Forex Rate Graph 21/1/13

GBP/USD January 14 at 16:05 GMT

GBP/USD 1.6454 H: 1.6464 L: 1.6367

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6231 1.6329 1.6416 1.6549 1.6705 1.6964

  • GBP/USD has posted gains in Tuesday trading. The pair pushed above the 1.64 line in the European session, and continues to gain ground in North American trading.
  • 1.6416 has reverted back to a support line as the pair trades at higher levels. This is a not a strong line and it could face pressure if the pound retracts. This is followed by a stronger support line at 1.6329.
  • 1.6549 is the first line of resistance. This is followed by resistance at 1.6705.
  • Current range: 1.6416 to 1.6549

Further levels in both directions:

  • Below: 1.6416, 1.6329, 1.6231, 1.6125 and 1.6000
  • Above: 1.6549, 1.6705, 1.6964 and 1.7182

OANDA's Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Monday trading. This is not reflected in the pair's movement, as the pound has sustained sharp losses against the dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to move higher.

The pound has lost over a cent in Monday trading, following sharp losses in the European session. The currency has edged higher early in the North American session.

GBP/USD Fundamentals

  • 9:30 British CPI. Estimate 2.1%. Actual 2.0%.
  • 9:30 British PPI Input. Estimate -0.2%. Actual 0.1%.
  • 9:30 British RPI. Estimate 2.7%. Actual 2.7%.
  • 9:30 British Core CPI. Estimate 1.8%. Actual 1.7%.
  • 9:30 British HPI. Estimate 5.9%. Actual 5.4%.
  • 9:30 British PPI Output. Estimate 0.2%. Actual 0.0%.
  • 12:30 US NFIB Small Business Index. Estimate 93.2 points.
  • 13:30 US Core Retail Sales. Estimate 0.4%. Actual 0.7%.
  • 13:30 US Retail Sales. Estimate 0.2%. Actual 0.2%.
  • 13:30 US Import Prices. Estimate 0.3%. Actual 0.0%.
  • 15:00 US Business Inventories. Estimate 0.4%. Actual 0.4%.
  • 17:45 US FOMC Member Charles Plosser Speaks.
  • 18:20 US FOMC Member Richard Fisher Speaks.

*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 - Pounds Gains As U.K. Inflation Data Meets Expectations