By Kenney Fisher
The British pound continues to point upwards and has crossed above the key 1.60 line in Tuesday trading. The currency got a boost from a superb British Services PMI, which hit its highest level since May 1997. In the US, the week's first key release looked solid, as ISM Non-Manufacturing PMI beat the estimate.
British PMIs have enjoyed an excellent week. Construction PMI climbed to 59.4 points in October, its best reading since September 2007. This was followed by Services PMI on Tuesday, which improved to 62.4 points, compared to 60.3 points the month before. This figure was the best we've seen since May 1997, as the UK services sector continues to improve as each month passes. In the US, the Non-Manufacturing PMI rose from 54.4 points in September to 55.4 points in October. This beat the estimate of 54.2 points.
The Federal Reserve met for a policy meeting last week, the first since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed's policy statement was less dovish than expected, as the Fed noted that the economy was expanding "at a moderate pace" and left the door open for QE tapering in December. However, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.
After a host of weak numbers early in the week, US numbers showed some improvement. Unemployment Claims practically matched the forecast, and ISM Manufacturing PMI beat the estimate. With the Fed unlikely to taper QE before 2014, the QE uncertainty which was has been weighing on the dollar has eased, which could bolster the US dollar.
GBP/USD for Tuesday, November 5, 2013
GBP/USD November 5 at 15:40 GMT
GBP/USD 1.6032 H: 1.6063 L: 1.5950
- GBP/USD continues to post gains in Tuesday trading and crossed above the key 1.60 line early in the European session.
- On the downside, 1.6000 has reverted to a support role. This line could face pressure if the pound retracts. This is followed by support at 1.5877.
- The pair is facing resistance at 1.6125. This is followed by a resistance line at 1.6231.
- Current range: 1.6000 to 1.6125.
Further levels in both directions:
- Below: 1.6000, 1.5877, 1.5756 and 1.5645 and 1.5537
- Above: 1.6125, 1.6231, 1.6300 and 1.6476
OANDA's Open Positions Ratio
GBP/USD ratio is pointing to movement towards short positions. This is not reflected in the current movement of the pair, as the pound continues to move higher at the expense of the dollar. Short positions continue to dominate the open positions, reflecting a trader bias towards the US dollar reversing the current trend and moving to higher ground.
The pound continues to push higher, buoyed by an excellent Services PMI. We could see the pair settle down during the North American session and continue to trade in the mid-1.60 range.
- 9:30 British Services PMI. Estimate 60.4 points. Actual 62.5 points.
- 15:00 US ISM Non-Manufacturing PMI. Estimate 54.2 points. Actual 55.4 points.
- 15:00 US IBD/TIPP Economic Optimism. Estimate 41.1 points. Actual 41.4 points.
*Key releases are highlighted in bold
*All release times are GMT
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