By Kenny Fisher
The British pound continues to point upwards on Wednesday, as GBP/USD edged higher and is trading in the mid-1.71 range in the North American session. On the release front, British Construction PMI looked sharp, rising to a four-month high. Nationwide HPI improved in June and beat the estimate. In the US, ADP Nonfarm Employment Change looked excellent, posting strong gains.
The high-flying pound continues to ascend, buoyed by strong PMI releases, which are important gauges of the health of the British economy. On Wednesday, Construction PMI rose to 62.6 points, beating the forecast of 59.7. The index has remained above the 60-point level throughout 2014, pointing to ongoing expansion in the UK construction sector. Earlier in the week, British Manufacturing PMI improved slightly in the June release. The index came in at 56.7 points, posting a seven-month high. We'll get a look at Services PMI on Thursday.
In the US, ADP Nonfarm Payrolls exceeded all expectations, adding 281 thousand jobs in June. This easily beat the estimate of 207 thousand and bodes well for the official Nonfarm Payrolls, which will be released on Thursday (a day earlier than usual due to the Fourth of July holiday in the US). If Nonfarm Payrolls can beat the estimate, we could see the US dollar make up some ground against the pound.
Last week's US GDP release for Q1 was a disaster, as the economy contracted by almost 3%. However, the markets remained calm, and the US dollar escaped without much damage against most of its major rivals. More recent releases have been better, notably consumer confidence, housing data and Wednesday's excellent ADP Nonfarm Payrolls.
GBP/USD for Wednesday, July 2, 2014
GBP/USD July 2 at 15:00 GMT
GBP/USD 1.7170 H: 1.7176 L: 1.7141
- GBP/USD was flat in the Asian session and showed mixed movement in European trading. The pair has edged higher in North American trading.
- 1.7000 continues to provide strong support.
- 1.7183 is an immediate resistance line. Will the pair break through this barrier? This is followed by 1.7228, which has held firm since October 2008.
- Current range: 1.7000 to 1.7183.
Further levels in both directions:
- Below: 1.7000, 1.6920, 1.6825 and 1.6700
- Above: 1.7183, 1.7228, 1.7383 and 1.7482
OANDA's Open Positions Ratio
GBP/USD is pointing to gains in long positions on Wednesday, continuing the direction we say a day earlier. This is consistent with the movement of the pair, as the pound continues to post gains. A strong majority of open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing its current downward trend and moving higher.
- 6:00 British Nationwide HPI. Estimate 0.6%. Actual 1.0%.
- 8:30 British Construction PMI. Estimate 62.6 points. Actual 59.7 points.
- 12:15 US ADP Nonfarm Employment Change. Estimate 207K. Actual 218K.
- 14:00 US Factory Orders. Estimate -0.4%. Actual -0.5%.
- 14:30 US Crude Oil Inventories. Estimate -2.2M. Actual -3.2M.
- 15:00 US Fed Chair Janet Yellen 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.