GBP/USD – Pound Shrugs Off Sharp US Data

GBP/USD is trading quietly in Tuesday trading, as the pair continues to trade in the mid-1.63 range in Tuesday’s North American session. In economic news, the sole British release this week, BBA Mortgage Approvals met expectations. Over in the US, Core Durable Goods jumped 1.2%, a seven-month high, while New Home Sales climbed to 464 thousand, well above the estimate.

After disappointing the markets late last week, US releases bounced back with strong numbers on Tuesday. Core Durable Goods Orders posted a strong gain of 1.2%, its best showing since April. The key manufacturing indicator had posted four consecutive declines, so the sharp gain was welcome news. Durable Goods Orders bounced back from a  sharp decline in October with a gain of 3.5%, well above the estimate of 1.7%. New Homes Sales also impressed with a five-month high, climbing to 464 thousand. The estimate stood at 449 thousand.

The markets are still buzzing after last week’s announcement by the Federal Reserve that it would begin tapering its QE program by $10 billion a month, commencing in January. This will reduce the Fed’s asset purchases to $75 billion every month, comprised of $40 billion in Treasuries and $35 billion in mortgage bonds. The announcement came as somewhat of a surprise, as most analysts had expected the Fed to hold off on any QE reductions until early next year.

In its dramatic tapering announcement, the Federal Reserve was careful to separate tapering from rate hike expectations. Fed chairman Bernard Bernanke stated that interest rates are likely to remain low even after the unemployment rate drops below 6.5%. Previously, the Fed had stated that it would start to consider rate increases when unemployment fell below this level. Bottom line? With the unemployment rate at 7.0%, it could be a while before we see higher interest rates in the US.

GBP/USD for Tuesday, December 24, 2013

GBP/USD December 24 at 15:55 GMT

GBP/USD 1.6365 H: 1.6382 L: 1.6321

GBP/USD Technical

• GBP/USD has edged higher on Tuesday. The pair touched a low of 1.6323 in the European session but has since moved higher.
• The round number of 1.6300 continues to provide support. This is followed by support at 1.6231.
• On the upside, the pair is facing resistance at 1.6476. The next resistance line is at 1.6600, which has not been tested since August 2011.
• Current range: 1.6300 to 1.6476

Further levels in both directions:

• Below: 1.6300, 1.6231, 1.6125, 1.6000 and 1.5893
• Above: 1.6476, 1.66, 1.6705 and 1.6964

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions. This is consistent with what we are seeing from the pair, as the pound has edged higher. Short positions continue to dominate the GBP ratio, reflecting a trader bias towards the US dollar posting gains at the expense of the pound.

The pair has enjoyed a quiet start to the week, and this trend continues in the Tuesday North American session. We can expect thin trading and limited movement ahead of the Christmas day holiday on Wednesday.

GBP/USD Fundamentals

• 9:30 British BBA Mortgage Approvals. Estimate 44.5K. Actual 45.0K.
• 13:30 US Core Durable Goods Orders. Estimate 0.9%. Actual 1.2%.
• 13:30 US Durable Goods Orders. Estimate 1.7%. Actual 3.5%.
• 14:00 US HPI. Estimate 0.5%. Actual 0.5%.
• 15:00 US New Home Sales. Estimate 449K. Actual 464K.
• 15:00 US Richmond Manufacturing Index. Estimate 15 points. Actual 13 points.

*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.