By Kenny Fisher
The British pound has shot higher to begin the new week. GBP/USD has gained about 100 points on Monday, as the pair trades in the high-1.65 range in the North American session. In economic news, US New Home Sales took a tumble, and the pound took full advantage. There are no British releases on Monday.
The health of the US housing sector continues to concern the markets, as New Home Sales dropped sharply in December to 414 thousand, down from 464 thousand a month earlier. This was nowhere near the estimate of 457 thousand. This follows a disappointing Existing Home Sales release last week. The key indicator dropped to 4.87 million, down from 4.90 million a month earlier and shy of the estimate of the 4.94 million. This was the indicator's fourth straight drop. The markets will be hoping for better news from Pending Home Sales on Thursday.
The UK Unemployment Rate dropped to 7.1% in December, down from 7.4% a month earlier. The strong reading was welcomed by the markets, as the BOE has previously stated that the 7.0% unemployment level was a threshold at which it would consider raising interest rates, which currently are at 0.50%. However, the market excitement is likely premature, as the BOE has recently noted that the 7.0% threshold would by no means trigger a rate increase. Last week's BOE minutes noted that the 7.0% level would likely be reached earlier than anticipated, but this did not mean that the BOE would immediately respond with a rate hike. Nonetheless, the pound shot after the unemployment rate release, and there's little doubt that the Bank is under increased pressure to raise interest rates.
GBP/USD for Monday, January 27, 2014
GBP/USD January 27 at 16:20 GMT
GBP/USD 1.6677 H: 1.6687 L: 1.6579
- GBP/USD has posted sharp gains in Monday trading. The dollar has been putting strong pressure on the pound throughout the European session.
- On the downside, 1.6549 continues to provide support. This line has some breathing room as the pair trades at higher levels. This is followed by stronger support at 1.6416.
- 1.6705 is the next line of resistance. This weak line could be tested if the pound's surge continues. This is followed by stronger resistance at 1.6964, which is protecting the key 1.70 line.
- Current range: 1.6549 to 1.6705
Further levels in both directions:
- Below: 1.6549, 1.6416, 1.6329, 1.6231 and 1.6125
- Above: 1.6705, 1.6964, 1.7182 and 1.7246
OANDA's Open Positions Ratio
GBP/USD ratio is pointing to gains in long positions in Monday trading. This is consistent with the pair's movement, as the pound has posted sharp gains. 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 move.
The pound continues to show strong activity and has recovered most of the losses sustained on Friday. GBP has steadied in the North American session after strong gains in European trading.
- 13:30 US New Home Sales. Estimate 457K. Actual 414K.
- 14:00 US Flash Services PMI. Estimate 56.2 points. Actual 56.6 points.
*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.