By Stuart McPhee
Over the last month or so the GBP/USD has established and traded within a trading range roughly around the key level of 1.6450. Towards the end of last year, the pound rallied higher and moved to a resistance level at 1.66 which represented a multi-year high before easing back to below 1.6450. In the last couple of weeks it has rallied again trying to break through the 1.6450 level before dropping back in the last few days to a support level at 1.6350. In late November 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. This level continues to play a role in providing support. In early November, the pound bounced strongly off the support level at 1.59 to return back to above 1.6250.
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 to 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.
The Bank of England governor, Mark Carney, has played down the threat of a UK housing bubble - as the Royal Institution of Chartered Surveyors (RICS) warned house price rises could become unsustainable in some areas. Carney told MPs on the Treasury committee that Britain's rising market was not currently a threat to financial stability, because mortgage approvals and sales were picking up from low levels during the financial crisis. "We've had an acceleration from quite a low level. Any time we see a sharp increase in credit growth we take an interest. "We do have to put in some context though that it is still running below historic averages." Carney added that the Bank was monitoring the government's Help to Buy scheme, but stressed it was modest in scale compared with the overall market.
(Daily chart / 4 hourly chart below)
GBP/USD January 16 at 23:20 GMT 1.6355 H: 1.6383 L: 1.6314
During the early hours of the Asian trading session on Friday, the GBP/USD is continuing to settle just above 1.6350 after remaining quite steady over the last couple of days. Current range: Right on 1.6350.
Further levels in both directions:
• Below: 1.6350, 1.6250 and 1.5900.
• Above: 1.6450 and 1.6600.
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 remains just below 30% as the GBP/USD stays under the level at 1.6450. Trader sentiment remains heavily in favour of short positions.
- 05:00 JP Consumer Confidence (Dec)
- 09:30 UK Retail Sales (Dec)
- 13:30 US Building Permits (Dec)
- 13:30 US Housing Starts (Dec)
- 14:15 US Capacity utilisation (Dec)
- 14:15 US Industrial production (Dec)
- 14:55 US Univ of Mich Sent. (Prelim.) (Jan)
*All release times are GMT