GBP/USD – Pound Remains Firm After Dovish Yellen Comments

The pound has posted slight gains on Monday, as the GBP trades in the mid-1.66 range in the North American session. The pound has looked sharp, gaining close to 200 points in the past week. In economic news, British Net Lending to Individuals matched the forecast. BOE Governor Mark Carney will speak at a Bank of England press conference in London later on Monday. Over in the US, Chicago PMI slid to an eight-month low. Federal Reserve chair Janet Yellen said that stimulus measures would still required for some time, putting pressure on the greenback.

On Monday, Fed chair Janet Yellen said that “considerable slack” remained in the US economy and this would require further stimulus measures. Currently, the Fed is purchasing $55 billion in assets under its QE scheme. There have been three tapers to QE so far, and Yellen plans to wind up the program in the fall, provided that the US economy does not run into any serious turbulence. At the same time, the Federal Reserve has stated that its has no plans to raise interest rates until sometime in 2015.

US Unemployment Claims continued to impress last week. The key indicator dropped to 311 thousand, its lowest level in over three months. The estimate was 326 thousand, marking the fourth straight week that the reading has come in below the forecast. The news was not as good from Pending Home Sales, with a reading of -0.8%. This disappointed the markets, which had expected a small gain of 0.1%. Earlier in the week, New Home Sales also lost ground in February, and concern is bound to increase about the health of the US housing industry. Final GDP posted a gain of 2.6% in Q4, just shy of the estimate of 2.7%. This was lower than the Q3 gain, but is indicative of a growing economy.

Ukraine’s economy is in shambles as a result of the four-month political crisis which led to the ouster of the government and the Russian annexation of the Crimean region. Prime Minister Arseniy Yatsenyuk acknowledged that the country is on the edge of bankruptcy, and GDP could drop by as much as 3% this year. However, help is on the way. The IMF is set to sign a two-year loan of up to $18 billion, and the EU has offered a package of EUR 11 billion. Ukraine has already received two bailouts from the IMF since 2008, and will have to implement budget cuts and other measures in order to receive the new package from the IMF.

GBP/USD for Monday, March 31, 2014

GBP/USD March 31 at 16:25 GMT

GBP/USD 1.6679 H: 1.6680 L: 1.6612

GBP/USD Technical

• GBP/USD has posted slight gains on Monday. The pair has touched a high of 1.6680 in the North American session.
• On the downside, 1.6549 is a strong support level.
• 1.6705 continues to provide resistance. This is not a strong line and could face pressure if the pound continues to move higher.
• Current range: 1.6549 to 1.6705.

Further levels in both directions:

• Below: 1.6549, 1.6416, 1.6329, 1.6236 and 1.6146
• Above: 1.6705, 1.6765, 1.6896 and 1.6964

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Monday. This is not consistent with what we are seeing from the pair, as the pound continues to move higher. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing its downward trend.

The pound continues to move higher against the dollar, which is under pressure in the North American session.

GBP/USD Fundamentals

• 8:30 British Net Lending to Individuals. Estimate 2.3B. Actual 2.3B.
• 8:30 British M4 Money Supply. Estimate 0.5%. Actual 0.7%.
• 8:30 British Mortgage Approvals. Estimate 75K. Actual 70K.
• 13:45 US Chicago PMI. Estimate 59.2 points.
• 13:55 US Federal Reserve Chair Janet Yellen Speaks.
• 17:15 BOE Governor Mark Carney Speaks.

*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.