GBP/USD - Pound Gains Despite Weak U.K. Mfg. Numbers

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

By Kenny Fisher

The British pound has posted gains in Tuesday trading. GBP/USD is trading in the mid-1.64 range despite a weak release from CBI Industrial Order Expectations earlier in the day. It's another quiet day in the US, with no releases on the schedule. On Wednesday, we'll get a look at key British employment numbers, with the release of Claimant Change and the Unemployment Rate.

In the UK, CBI Industrial Order Expectations took a sharp dip, dropping to -2 points, compared to +12 points in the previous reading. This surprised the markets, which had anticipated a strong reading of +10 points. The weak reading is consistent with other manufacturing indicators, which have pointed downwards in December. Manufacturing PMI slipped and missed the estimate, while Manufacturing Production dropped to a three-month low. However, the pound has managed to pull higher on Tuesday despite the weak release.

The UK wrapped up last week in fine style, as Retail Sales looked brilliant, posting a gain of 2.6% in December. We haven't seen such a strong jump since October 2004. This easily beat the estimate of 0.5%, and was well above last month's rise of 0.3%. The whopping gain will likely revive speculation about a possible interest rate hike by the Bank of England. Although Governor Mark Carney has done his best to pour cold water on the idea, the improving UK economy is increasing pressure on the BOE to respond with a rate increase. The excellent Retail Sales reading gave the pound a boost on Friday, but GBP/USD still closed the week down almost a cent.

Weak inflation levels in the US remain a concern, as this is an indication of an underperforming economy. This was underscored by poor December releases. Core CPI, which posted a weak gain of just 0.1%, while the Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. Last week, Chicago Fed President Charles Evans said that the low rate of U.S. inflation is “both puzzling and worrisome” and reason enough to maintain low interest rates, even if the employment picture continues to brighten.

GBP/USD for Tuesday, January 21, 2014

Forex Rate Graph 21/1/13

GBP/USD January 21 at 16:20 GMT

GBP/USD 1.6477 H: 1.6486 L: 1.6400

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6231 1.6329 1.6416 1.6549 1.6705 1.6964
Click to enlarge
  • GBP/USD has moved higher in Tuesday trading. The pair touched the 1.64 line in the European session but has recovered and climbed higher.
  • On the downside, 1.6416 has some breathing room as the pound has moved upwards. This is followed by strong support at 1.6329.
  • 1.6549 is the next line of resistance. This is followed by resistance at 1.6705, which has held firm since May 2011.
  • 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 on Tuesday, continuing the trend we saw on the previous day. This is reflected in what we're seeing from the pair, as GBP/USD has moved higher. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing its downward movement.

GBP/USD has pushed higher on Tuesday. After strong gains in the European session, the pair has steadied in North American trading.

GBP/USD Fundamentals

  • 11:00 British CBI Industrial Order Expectations. Estimate +10 points. Actual -2 points.

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.