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By Kenny Fisher

The British pound has posted gains on Wednesday, pushing back above the 1.67 line. The pound took has taken advantage of weak US numbers, as ADP Non-Farm Payrolls and ISM Non-Farm Manufacturing PMI weakened in February. Earlier in the day, UK Services PMI met expectations.

British Services PMI showed little change in February, as the key index came in at 58.2 points, slightly above the estimate of 58.0. This was welcome news after a weak release from Construction PMI, which dropped to 62.4 points, down from 64.4 a month earlier. Analysts blamed the soft reading on recent heavy floods and rains which battered the country and hampered construction activity.

In the US, it's looking like another nasty streak of weak releases. ADP Non-Farm Employment Change posted another sharp drop in February, coming in at 139 thousand, down from 175 thousand a month earlier. The weak reading was well off the estimate of 159 thousand. We'll get a look at Unemployment Claims and the official Non-Farm Payrolls later in the week, and the dollar could take a hit if these releases fail to meet expectations. Meanwhile, the news was not much better from the services sector. ISM Non-Manufacturing PMI dropped to 51.6 points, down sharply from 54.0 a month ago. This was well below the estimate of 53.8, and the index's lowest level since August 2010.

Meanwhile, nervous markets are glued to the Ukraine, as Russia has effectively taken over Crimea following the ousting of the Ukrainian president, who has fled to Russia. The US and Russia continue to talk tough as the standoff between Russia and the Ukraine continue. Until this tense situation subsides, traders should be prepared for volatility in the currency markets.

Despite the string of disappointing numbers out of the US, the assumption is that the Fed will continue its QE tapering moves later in March. This was the signal from Fed Chair Janet Yellen when she testified before the Senate last week. Another trim to QE is bullish for the US dollar and would mark a vote of confidence by the Fed in the US economy. However, if US numbers continue to point downwards, we could see the US dollar take a hit against its major rivals.

GBP/USD for Wednesday, March 5, 2014

Forex Rate Graph 21/1/13

GBP/USD March 5 at 16:35 GMT

GBP/USD 1.6730 H: 1.6742 L: 1.6658

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6416 1.6549 1.6705 1.6765 1.6896 1.6964

  • GBP/USD has moved higher in Wednesday trading. The pair moved into 1.67 territory during the European session.
  • 1.6705 has switched to a support as the pound moves higher. This weak line could see further action during the day. This is followed by support level at 1.6549.
  • On the upside, 1.6765 is the next line of resistance. Next, there is resistance at 1.6896, protecting the 1.69 line.
  • Current range: 1.6705 to 1.6765.

Further levels in both directions:

  • Below: 1.6705, 1.6549, 1.6416, 1.6329 and 1.6231
  • Above: 1.6765, 1.6896, 1.6964, 1.7087 and 1.7192

OANDA's Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Wednesday, reversing directions from the previous day. This is not consistent with the pair's current move, as the pound has posted gains against the US dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing direction and moving to higher ground.

GBP/USD is on the move, posting gains on Wednesday. The pair is steady in the North American session.

GBP/USD Fundamentals

  • 9:30 British Services PMI. Estimate 58.0 points. Actual 58.2 points.
  • 13:15 US ADP Non-Farm Employment Change. Estimate 159K. Actual 139K.
  • 14:00 US Final Services PMI. Estimate 52.7 points. Actual 53.3 points.
  • 15:00 US ISM Non-Manufacturing PMI. Estimate 53.8 points. Actual 51.6 points.
  • 15:30 US Crude Oil Inventories. Estimate 0.9M. Actual 1.4M.
  • 19:00 US Beige Book.

*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.