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By Kenny Fisher

The British pound didn't get much of a welcome from February, as the currency slid over 100 cents on Monday. GBP/USD has steadied in Tuesday trade, with the pair trading at the 1.63 line range early in the North American session. The pound has now lost over 300 points against the US dollar in just over a week. Taking a look at economic releases, British Construction PMI hit its highest level in over six years, but the pound failed to respond. In the US, manufacturing numbers continued to disappoint, as Factory Orders slid to a five-month low.

British PMI releases are in the spotlight this week. Construction PMI looked very sharp, rising to 64.6 points, its highest level since August 2007. This easily beat the estimate of 61.6 points. Manufacturing PMI was released on Monday, and the index did not look nearly as sharp, dipping to 56.7 points and falling short of the estimate. We'll get a look at Services PMI on Wednesday.

US Factory Orders did not impress in January. The important manufacturing release posted a decline of 1.5%, compared to a gain of 1.8% a month earlier. The indicator managed to beat the estimate of -1.9%, but US manufacturing numbers continue to raise concerns. On Monday, ISM Manufacturing PMI dropped sharply, posting a ten-month low. As a result, the dollar tumbled against the yen and pound.

In a highly anticipated decision, the US Federal Reserve pressed the taper trigger for a second month in a row last week . This reduces its stimulus program (QE) by another $10 billion, lowering the bond-buying scheme to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday’s policy statement was Bernanke's swan song, as Janet Yellen took over the reins as Fed chair on February 1.

GBP/USD for Tuesday, February 4, 2014

Forex Rate Graph 21/1/13

GBP/USD February 4 at 16:25 GMT

GBP/USD 1.6302 H: 1.6344 L: 1.6258

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6000 1.6050 1.6125 1.6231 1.6329 1.6416

  • GBP/USD continues to lose ground in Monday trading. The pair broke below the 1.64 line early in the European session and the pound remains under strong pressure in North American session.
  • On the downside, 1.6231 is providing support to the pair. This is followed by support at 1.6125.
  • 1.6329 has reverted to a resistance role as the pound continues to slide. This is followed by resistance at 1.6416.
  • Current range: 1.6231 to 1.6329

Further levels in both directions:

  • Below: 1.6231, 1.6125, 1.6050, 1.60 and 1.5915
  • Above: 1.6329, 1.6416, 1.6549, 1.6705 and 1.6964

OANDA's Open Positions Ratio

GBP/USD ratio is pointing to strong gains in long positions on Tuesday, continuing the trend we have seen since last week. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar rally continuing.

The pound is struggling to remain above the 1.63 line on Tuesday. GBP/USD is showing little movement early in the North American session.

GBP/USD Fundamentals

  • 9:30 British Construction PMI. Estimate 64.6 points. Actual 61.6 points.
  • 15:00 US Factory Orders. Estimate -1.9%. Actual -1.5%.
  • 15:00 US IBD/TIPP Economic Optimism. Estimate 46.1 points. Actual 44.9 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.

Source: GBP/USD - Pound Steadies After Sharp Losses