GBP/USD - Slight Gains As Employment Data Shines

Includes: FXB, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The pound has posted modest gains on Wednesday, as GBP/USD trades in the mid-1.66 level in the North American session. Claimant Change continues to look sharp, as the key indicator dropped to a three-month low. The markets are anxiously awaiting the Federal Reserve's policy statement, which will be issued later in the day. The Fed is expected to trim QE by another $10 billion.

Will we see another QE trim on Wednesday? The US Federal Reserve concludes its policy meeting on Wednesday, its first meeting under the tutelage of Janet Yellen. Recent US numbers haven't dazzled, but they should be strong enough for the Federal Reserve to go ahead with another taper of QE. This would be the third trim of the Fed's asset-buying scheme, and would reduce QE to $55 billion per month. These tapers are dollar-positive and mark a vote of confidence in the US economy by the Fed, so a taper could give the US a push upwards.

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.

Events are moving fast in the Ukrainian crisis. Voters in Crimea voted overwhelmingly to join Russia in a referendum on Sunday. The next day, Russian Prime Minister Putin formally recognized Crimea as an independent state, paving the way for annexation. The EU and US have slapped targeted sanctions against high-ranking Russian officials, and Western leaders plan to meet during the week to discuss a united strategy to respond to the crisis. So far, the currency markets have generally not reacted to the events in Ukraine, but that could change if the crisis deteriorates.

GBP/USD for Wednesday, March 19, 2014

Forex Rate Graph 21/1/13

GBP/USD March 19 at 16:30 GMT

GBP/USD 1.6635 H: 1.6654 L: 1.6586

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6329 1.6416 1.6549 1.6705 1.6765 1.6896
  • GBP/USD is pointing upwards in Wednesday trade. The pair touched a high of 1.6654 early in the European session.
  • On the downside, 1.6549 has some breathing room as the pound has moved higher. 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 almost unchanged on Wednesday. This is not consistent with what we are seeing from the pair, as the pound has posted gains. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar gaining ground against the pound.

The pound has posted some gains on Wednesday. We could see some stronger movement during the North American session, as the Federal Reserve issues a policy statement.

GBP/USD Fundamentals

  • 12:30 US Current Account. Exp. -88B. Actual -81B.
  • 14:30 US Crude Oil Inventories. Exp. 2.4M. Actual 5.9M.
  • 18:00 US FOMC Economic Projections.
  • 18:00 US FOMC Statement.
  • 18:00 US Federal Funds Rate.
  • 18:30 US FOMC Press Conference.

*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.

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