GBP/USD – Lower After Strong US Consumer Confidence Sparkles

GBP/USD has posted modest losses in Tuesday trading. The pair is trading in the mid-1.55 range in Tuesday’s North American session. On Tuesday, US consumer confidence and manufacturing numbers looked very sharp. The Richmond Manufacturing Index hit a sixteen-month high, while CB Consumer Confidence soared to its highest level in over five years. There are no British releases on Tuesday.

US numbers got off to a rough start this week, as Core Durable Goods Orders and Durable Goods Orders both posted declines. There was better news from the manufacturing sector on Tuesday, as the Richmond Manufacturing Index jumped from -7 to 14 points in August, its best performance since April 2012. CB Consumer Confidence climbed from 80.3 points to 81.5 points in the August reading. This beat the estimate of 79.5 and was the indicator’s best showing since January 2008.

When will the US Federal Reserve scale down QE? That is the million dollar question which continues to preoccupy the markets. The release last week of the FOMC didn’t provide any hints, but appeared to confirm that QE tapering is a question of “when” rather than “if”. The minutes showed that Fed policymakers favor scaling back the bond-buying program, but are divided on the timing of such a move. The policymakers stated that recent US economic data was “mixed”, and all members agreed that it was still too early to scale back the current bond-buying levels of $85 billion each month. QE is a dollar-positive event, so traders should prepare for the US currency to post gains against the major currencies when the Fed decides to taper. Meanwhile, the continuing uncertainty over QE tapering has boosted the US dollar, raised the yields on US treasury bonds and had worldwide repercussions, such as causing jittery investors to pull billions of dollars out of emerging markets.

The annual economic conference at Jackson Hole ended on the weekend. The summit attracted top financial officials from around the world. One of the participants at Jackson Hole was BOE Deputy Governor Charlie Bean. He reiterated that the BOE plans to leave its key interest rate of 0.50% until 2016. Bean said the BOE was trying to clearly communicate its intentions and admitted that he was surprised that some market players were skeptical that the BOE would follow through on this message. We could hear more on this subject on Wednesday from BOE Governor Mark Carney, who will address a conference in Nottingham on Wednesday.

GBP/USD for Tuesday, August 27, 2013

GBP/USD August 27 at 15:30 GMT

GBP/USD 1.5543 H: 1.5592 L: 1.5482

GBP/USD Technical

GBP/USD has posted modest losses in Tuesday trading. The  pair was steady in the Asian session, but dropped sharply in European trading, dropping to a low of 1.5482 before recovering to cross above the 1.55 line.

GBP/USD continues to face resistance at 1.5645. Next, there is strong resistance at 1.5756.

On the downside, the GBP/USD continues to receive support at 1.5527. This is not a strong line and could be tested if the pound loses ground. This is followed by a strong support level at 1.5432.

• Current range: 1.5527 to 1.5645

Further levels in both directions:

• Below: 1.5527, 1.5432, 1.5309 and 1.5203
• Above: 1.5645, 1.5756, 1.5877, 1.6000 and 1.6071

OANDA’s Open Positions Ratio

The GBP/USD ratio is showing movement towards short positions in Tuesday trading. This is reflected in the current movement of the pair, as GBP/USD has moved lower. The ratio has a large majority of short positions, which reflects a strong bias in favor of the US dollar posting gains against the pound.

GBP/USD has shown some movement on Tuesday, as the pair trades in the mid-1.55 range. Strong US releases earlier today did not have much impact on the pair, and today’s North American session could be uneventful.

GBP/USD Fundamentals

• 13:00 US S&P/CS Composite-20 HPI. Estimate 11.9%. Actual 12.1%.
• 14:00 US CB Consumer Confidence. Estimate 79.6 points. Actual 81.5 points.
• 14:00 US Richmond Manufacturing Index. Estimate -7 points. Actual 14 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.