GBP/USD – Pound Posts Strong Gains, Tests 1.54

The British pound continues to move higher against the US dollar in Thursday trading. GBP/ USD was testing the 1.54 line early in the North  American session. The pair briefly crossed the 1.54 line earlier, and is at its highest level since mid-February. There are no British releases on Thursday. In the US, today’s highlight was Unemployment Claims. The key indicator looked sharp, coming in well below the estimate.

The Federal Open Market Committee released its meeting minutes on Wednesday, and the most exciting thing about the release was that it was leaked several hours ahead of schedule. The Federal Reserve was not amused, and has ordered an investigation into the matter. The minutes themselves turned out to be a non-event, with policymakers divided as to the extent and duration of the current round of QE. Some members wanted to wind down the program in the middle of 2013, while others felt it was more appropriate to wait until the end of the year. There was also discussion about whether to decrease the amount of asset purchases immediately, or continue the present levels until the end of the year. The division in opinion reflects uncertainty over the extent of the US recovery and the health of the economy. With the US reeling off a host of poor releases throughout April, FOMC members might have had a different take on the QE program had the meeting taken place in April rather than March.

US releases finally got back on track on Thursday, as Unemployment Claims easily beat expectations.  The key indicator pointed to 346 thousand claims, a three-week low. The estimate stood at 362 thousand. The US has gone through a prolonged streak of weak numbers, so today’s employment data was a relief for the markets. Thursday’s numbers were certainly encouraging, but we’ll have to see more data to get a better picture of the health of the US economy. Friday will see more key US data, with the release of four key events – Core Retail Sales, PPI and Retail Sales and Consumer Sentiment.

With all the problems that the world’s major economies are experiencing, the danger of countries responding with protectionist policies is a serious source of concern. Underscoring this problem, the World Trade Organization downgraded its forecast for global trade growth in 2013, and stated that protectionism is on the increase. The WTO cut the 2013 forecast from 4.5% to 3.3%, and reported that trade in 2012 grew only 2.0%, one the weakest years on record. The WTO noted that events such as the Eurozone could result in countries restricting trade in an attempt to promote domestic growth. We are likely to see louder calls for protectionism if the global economic situation continues to deteriorate, as governments face increasing domestic pressure to shore up their lagging economies.

GBP/USD for Thursday, April 11, 2013

GBP/USD April 11 at 15:00 GMT

1.5402 H: 1.5848 L: 1.5319

GBP/USD Technical

The pound continues to push higher, and is testing the 1.54 level. The pair is facing resistance at 1.5461. This is followed by a resistance line at 1.5546. On the downside, 1.5392 is providing support. This is a weak line, and could see further activity. The next support level is at 1.5309, which is protecting the 1.53 level.

• Current range: 1.5309 to 1.5392.

Further levels in both directions:

• Below: 1.5309, 1.5203, 1.5138, 1.5053, 1.4988
• Above: 1.5392, 1.5546, 1.5674

OANDA’s Open Positions Ratios

The GBP/USD ratio is showing little movement in the Thursday session. This is not reflected in the current movement of the pair, as the pound continues to post gains. If GBP/USD continues to move higher, we can expect increased movement in the ratio. Long positions enjoy a substantial majority in the ratio, indicating that trader sentiment continues to be strongly biased in favor of the pound continuing to make inroads against the dollar. 

After a poor start this week, the pound has gained about 150 points against the dollar. Will the upward momentum continue? With three major US releases on Friday, we could see some volatility from the pair. Until then, we could see the pair trade close to the 1.54 level.

GBP/USD Fundamentals

• 12:30 US Unemployment Claims. Estimate 362K. Actual 346K.
• 12:30 US Import Prices. Estimate -0.4%. Actual -0.5%.
• 12:30 US FOMC Member James Bullard Speaks.
• 14:30 US Natural Gas Storage. Estimate -12B.
• 17:00 US 30-year Bond Auction.

*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.