GBP/USD – Post-Christmas Rally Continues As Pound Soars

GBP/USD continues to impress with a late-week rally and has gained around 140 points on Friday, as the pair trades in the mid-1.65 range in the European session. It’s another light schedule for releases, with no UK events for the third straight day. In the US, today’s highlight is Crude Oil Inventories.

The British pound continues to soar against the retreating US dollar. The pound has gained close to two cents since Wednesday, as low liquidity due to the holiday has resulted in sharp movement from the pair over the past two days. These are the highest levels we’ve seen from GBP/USD since May 2011.

US Unemployment Claims dropped sharply on Thursday. The indicator fell to 338 thousand, down from 379 thousand in the previous release. The estimate stood at 346 thousand. The sharp reading was a dramatic reversal from numbers over the past two weeks, which were much higher than the forecast. With the Federal Reserve poised to begin its long-awaited QE taper next month, employment releases have taken on added significance. If the labor market continues to improve, we are likely to see further QE reductions in 2014, which would give a boost to the US dollar against its major rivals.

There was some holiday cheer from US releases on Tuesday, as manufacturing and housing numbers pointed upwards. 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.

GBP/USD for Friday, December 27, 2013

GBP/USD December 27 at 11:50 GMT

GBP/USD 1.6558 H: 1.6578 L: 1.6407

GBP/USD Technical

• GBP/USD  continues to push higher in Friday  trading. The pair broke above the 1.65 line in the European session and touched a high of 1.6578, but has since retracted.
• 1.6476 is providing support. This is followed by support at the round number of 1.6300.
• On the upside, the pair is facing resistance at 1.6600. This is followed by resistance at 1.6705.
• Current range: 1.6476 to 1.6600

Further levels in both directions:

• Below: 1.6476, 1.6300, 1.6231, 1.6125 and 1.6000
• Above: 1.6600, 1.6705, 1.6964 and 1.7182

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions in Friday trading. With the pound posting sharp gains, the ratio movement is largely due to many long positions being covered, resulting in a higher percentage of open short positions.

The pound continues to post sharp gains in thin trading, which resulted in sharp movement from GBP/USD. This pattern could continue in the North American session, so we could see further volatility from the pair before the end of the week.

GBP/USD Fundamentals

• 15:30 US Natural Gas Storage. Exp. -177B.
• 16:00 US Crude Oil Inventories. Exp. 0.5%.

*Key releases are highlighted in bold

*All release times are GMT

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