GBP/USD – Little Movement As US Budget Standoff Continues

GBP/USD has started off the new trading week in quiet fashion, trading in the mid-1.61 range in Monday’s North American session. In the US, today’s sole release, Chicago PMI looked strong, posting a four-month high. In economic news, British Net Lending to Individuals matched the forecast, while US Chicago PMI improved to a five-month high. The spotlight remains on Congress, as the deadlock over the budget threatens to close down the US government on Tuesday. With no talks formal talks scheduled on Monday, a shutdown of non-essential government services is looking more likely as the day goes on.

All eyes are glued on Washington, as the US government will find itself without funds to operate if Congress fails to break the budget impasse on September 30, the last day of the current financial year. If that happens, non-essential government services would be forced to shut down. This last happened in 1996, and politicians on both sides of the divide will be trying to hammer out an agreement so that the government can keep operating. Both sides seem entrenched in their positions. Republicans want to defund Obamacare before they approve a budget, and the Democrats are determined to protect their health care bill. This crisis, which would likely affect the currency markets, could be a dress rehearsal for a much more serious crisis, which will occur in two weeks if Congress doesn’t raise the debt ceiling.

In Monday’s economic releases, British Net Lending to Individuals rose from 1.3 billion pounds to 1.6 billion in August, matching the forecast. The indicator is an important gauge of consumer spending, as an increase in credit demand should translate into stronger consumer spending, which is essential for economic growth. The US also started the week on a bright note, as Chicago PMI jumped from 53.0 to 55.7 points in August, beating the estimate of 54.5. This is the fifth consecutive release above the 50-point line, indicating ongoing expansion.

GBP/USD for Monday, September 30, 2013

GBP/USD September 30 at 14:40 GMT

GBP/USD 1.6148 H: 1.6182 L: 1.6128

GBP/USD Technical

• GBP/USD is steady in Monday trading. The pair barreled dropped to a low of 1.6128 in the European session but has moved higher.
• The pair is receiving support at 1.6125. This is a weak line which could be tested if the pound loses ground. This is followed by support at the significant round number of 1.6000.
• On the upside, the pair is facing resistance at 1.6231. This is followed by support at 1.6300, which was last tested in December 2012.
• Current range: 1.6125 to 1.6231

Further levels in both directions:

• Below: 1.6125, 1.6000, 1.5877, 1.5756, 1.5645 and 1.5527
• Above: 1.6231, 1.6300, 1.6421 and 1.6504

OANDA’s Open Positions Ratio

The GBP/USD ratio is pointing towards short positions in Monday trading. This is not reflected in the pair’s current movement, as the pound is showing little change. The ratio is comprised of a majority of short positions, which reflects a bias in favor of the US dollar moving to higher ground.

The GBP/USD has started the new week quietly. We could see some volatility from the pair during the day if the US budget crisis continues and leads to a government shutdown on Tuesday.

GBP/USD Fundamentals

• 8:30 British Net Lending to Individuals. Estimate 1.6B. Actual 1.6B.
• 8:30British M4 Money Supply. Estimate 0.7%. Actual 0.7%.
• 8:30 British Mortgage Approvals. Estimate 61K. Actual 62K.
• 13:45 US Chicago PMI. Estimate 54.5 points. Actual 55.7 points.

*Key releases are highlighted in bold

*All release times are GMT

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