Seeking Alpha
Currencies, macro, fixed income
Profile| Send Message|
( followers)

By Kenny Fisher

The pound lost further ground on Thursday, continuing the trend which began a day earlier. GBP/USD is trading just above the 1.65 line early in the North American session. The US dollar was broadly higher on Wednesday, following remarks by Federal Reserve chair Janet Yellen that interest rates could go up in the US in early 2015. It has been a busy day in the US. Unemployment Claims beat the estimate, but Existing Home Sales fell short of expectations. The Philly Manufacturing Index surged higher and easily beat the estimate. In the UK, CBI Industrial Order Expectations improved in February and beat the estimate.

The Federal Reserve wrapped up its policy meeting on Wednesday, the first meeting headed by Janet Yellen. The decision to trim QE by another $10 billion was widely expected, but her comments at the follow-up press conference gave the dollar a big boost against its major rivals. Yellen said that the Fed was on track to wind up QE in the fall, and could start to raise interest rates six months later. This is a more aggressive approach toward higher rates than the markets had expected and the US dollar shot higher against its major rivals as a result.

There was more good news from the US employment front as Unemployment Claims continue to post strong levels. The key indicator was up slightly to 320,000, beating the estimate of 327,000. Existing Home Sales dropped for a sixth straight month, raising concerns about the health of the housing sector. Meanwhile, the Philly Manufacturing Index bounced back with a strong gain, climbing to 9.0 points, crushing the estimate of 4.2 points.

Western countries are scrambling to respond to Russia's lightning takeover of the Ukrainian region of Crimea. The EU meets later on Thursday and may announce trade sanctions to punish Russia. Meanwhile, Ukraine says it will order its troops in Crimea to withdraw to the mainland in order to de-escalate the extremely tense situation. The crisis has set off the worst confrontation between Russia and the West in over 20 years.

In the UK, Employment Claims continue to post strong releases. The indicator dropped by 34,600 last month, easily beating the estimate of -23,000. The Unemployment Rate remained at 7.2%, matching the forecast. The BOE has tried to lower expectations of a rate hike, but with the economy continuing to grow, there is growing sentiment that we could see a rate hike within the next 12 months. As expected, the BOE decisions to maintain QE and interest rates were both unanimous, by a vote of 9-0.

GBP/USD for Thursday, March 20, 2014

Forex Rate Graph 21/1/13

GBP/USD March 20 at 16:30 GMT

GBP/USD 1.6611 H: 1.6580 L: 1.6480

GBP/USD Technical

S3S2S1R1R2R3
1.63291.64161.65491.67051.67651.6896
  • GBP/USD continues to lose ground in Thursday trade. The pair lost ground in the European session, dropping below the 1.65 line. It has bounced back above this level in the North American session.
  • On the downside, 1.6549 continues to provide support. This is followed by support at 1.6416.
  • 1.6705 is the first line of resistance. Next, there is resistance at 1.6765.
  • Current range: 1.6549 to 1.6705.

Further levels in both directions:

  • Below: 1.6549, 1.6416, 1.6329 and 1.6236
  • Above: 1.6705, 1.6765, 1.6896, 1.6964 and 1.7087

OANDA's Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Thursday. This is not consistent with what we are seeing from the pair as the pound continues to lose ground. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias toward the dollar continuing its rally against the retreating pound.

The pound continues to take it on the chin from the surging US dollar. Will GBP/USD dip into 1.64 territory?

GBP/USD Fundamentals

  • 11:00 British CBI Industrial Order Expectations. Estimate 5 points. Actual 6 points.
  • 12:30 US Unemployment Claims. Estimate 327K. Actual 320K.
  • 14:00 US Existing Home Sales. Estimate 4.65M. Actual 4.60M.
  • 14:00 US Philly Fed Manufacturing Index. Estimate 4.2 points. Actual 9.2M.
  • 14:00 US CB Leading Index. Estimate 0.3%. Actual 0.5%.
  • 14:30 US Natural Gas Storage. Estimate -58B. Actual -48B.
  • 16:30 External Bank of England MPC Member Martin Weale Speaks.
  • 20:00 US Bank Stress Test Results.

*Key releases are highlighted in bold

*All release times are GMT

Source: GBP/USD: Pound Slide Continues As U.S. Unemployment Claims Drop