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

By Kenny Fisher

The pound continues to lose ground on Friday, as GBP/USD is trading just below the 1.65 line in the European session. The pound has coughed up about 160 points this week to the surging US dollar. Looking at Friday's releases, British Public Sector Net Borrowing posted a deficit last month but beat the estimate. It's a quiet day in the US, with no data releases on the schedule. FOMC member Richard Fisher will discuss forward guidance at the London School of Economics.

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 towards 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 on the US employment front this week, as Unemployment Claims continue to post strong levels. The key indicator was up slightly to 320 thousand, beating the estimate of 327 thousand. 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.

The Ukrainian crisis is deepening. Russian President Vladimir Putin signed a deal on Friday which formally annexed Crimea to Russia. Western countries are scrambling to respond to Russia's lightning takeover of the Ukrainian region. The EU is meeting on Friday and is expected to announce further 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 twenty years.

In the UK, Employment Claims continues to post strong releases. The indicator dropped by 34.6 thousand last month, easily beating the estimate of -23.3 thousand. 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 Friday, March 21, 2014

Forex Rate Graph 21/1/13

GBP/USD March 21 at 13:15 GMT

GBP/USD 1.6492 H: 1.6520 L: 1.6476

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6236 1.6329 1.6416 1.6549 1.6705 1.6765

  • GBP/USD continues to lose ground in Friday trade. The pair touched a low of 1.6476 early in the European session.
  • On the downside, 1.6416 is providing support. This is followed by support at 1.6329.
  • 1.6549 has switched to resistance as the pound continues to lose ground. This is not a strong line. Next, there is resistance at 1.6705.
  • Current range: 1.6416 to 1.6549.

Further levels in both directions:

  • Below: 1.6416, 1.6329, 1.6236 and 1.6146
  • Above: 1.6549, 1.6705, 1.6765, 1.6896 and 1.6964

OANDA's Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Friday, continuing the trend we saw a day earlier. 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 towards the dollar continuing its rally against the retreating pound.

The pound continues to lose ground, which has been the trend for most of the week. GBP/USD continues to trade close to the 1.65 line.

GBP/USD Fundamentals

  • 9:30 British Public Sector Net Borrowing. Estimate 7.8B. Actual 7.5B.
  • 17:45 FOMC Member Richard Fisher Speaks.
  • 20:30 FOMC Member Narayana Kocherlakota Speaks.
  • 22:30 FOMC Member Jeremy Stein Speaks.

*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 - Struggling Pound Slips Below 1.65