GBP/USD - Steady As British GBP Matches Estimate

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

By Kenny Fisher

The British pound has steadied on Tuesday, after starting the week with strong gains against the US dollar. GBP/USD has gained about 100 points this week, as the pair trades in the high-1.65 range in the North American session. In economic news, British Preliminary GDP looked solid, posting a gain of 0.7%, which matched the forecast. US manufacturing data was dismal, as Core Durable Goods Orders and Durable Goods Orders both posted declines in December. CB Consumer Confidence surprised the markets by crossing above the 80-point level.

British Preliminary GDP, one of the most important economic indicators, looked solid in Q4 with a 0.7% gain, matching the estimate. The reading points to healthy growth in the economy. Last week, the pound shot up as the unemployment rate which dropped to 7.1%, close to the 7.0% level which the BOE had indicated that was a threshold for raising interest rates. The BOE minutes acknowledged 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, with the UK economy continuing to show improvement, as underscored by today's GDP reading, there's little doubt that the Bank of England finds itself under increased pressure to raise interest rates.

In the US, Core Durable Goods Orders posted another decline, its sixth in seven readings. The key manufacturing release fell 1.6%, well short of the estimate of a 0.7% gain. It was the indicator's sharpest drop since August 2012. There was no relief from Durable Goods Orders, which plunged lower by 4.3%, nowhere near the estimate of 1.9%. CB Consumer Confidence looked much sharper, climbing to 80.7 points, up from 78.1 a month earlier. The estimate stood at 78.3 points.

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.

GBP/USD for Tuesday, January 28, 2014

Forex Rate Graph 21/1/13

GBP/USD January 28 at 18:00 GMT

GBP/USD 1.6580 H: 1.6626 L: 1.6538

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6329 1.6416 1.6549 1.6705 1.6964 1.7182
Click to enlarge
  • GBP/USD has steadied on Tuesday, following sharp gains a day earlier. The pair lost ground early in the European session but has bounced higher since then.
  • On the downside, 1.6549 continues to provide support. This line was breached earlier in the day and could see more action. This is followed by stronger support at 1.6416.
  • 1.6705 is the next line of resistance. This is followed by 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 Tuesday trading, continuing the trend we saw at the start of the week. This is not consistent with the pair's movement, as the pound has posted modest 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 current downward move.

The pound continues to trade at high levels and has gained about 100 points this week. GBP/USD has edged lower early in the North American session.

GBP/USD Fundamentals

  • 13:30 US Core Durable Goods Orders. Estimate 0.7%. Actual -1.7%.
  • 13:30 US Durable Goods Orders. Estimate 1.9%. Actual -4.3%.
  • 14:00 US S&P/CS Composite-20 HPI. Estimate 13.7%. Actual 13.7%.
  • 15:00 US Richmond Manufacturing Index. Estimate 13 points. Actual 12 points.
  • 15:00 US CB Consumer Confidence. Estimate 78.3 points. Actual 80.7 points.

*Key releases are highlighted in bold

*All release times are GMT

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