GBP/USD – Pound Losses Continue

The British pound has edged lower on Friday, continuing the downward trend we have seen for most of the week. GBP/USD is trading in the mid-1.64 range in Friday’s European session. Today’s key event is UoM Consumer Sentiment out of the US. There are no British releases on Friday.

On Thursday, US Unemployment Claims disappointed, coming in above the estimate for the first time in four weeks. The key indicator rose to 348 thousand, up sharply from 326 thousand a week earlier. This was higher than the estimate of 331 thousand. The news was even worse from Pending Home Sales. The key indicator plunged 8.3%, its sharpest drop since April 2011. The markets were caught off guard by the news, as the estimate stood at -0.1%. This will raise concerns about the health of the US housing sector, as Existing Home Sales and New Home Sales also missed their estimates in December. The silver lining was courtesy of Advanced GDP, which posted its best reading in two years, with a strong gain of 3.2% in Q4. This was just shy of the estimate of 3.3%, and a nice rise from the Q3 reading of 2.8%.

In a highly anticipated decision, the Federal Reserve pressed the taper trigger for a second month in a row on Wednesday . This reduces its stimulus program (QE) by another $10 billion, lowering the bond-buying scheme to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday’s policy statement was Bernard Bernanke’s last hurrah, as Janet Yellen takes over the reins as the Fed chair on February 1.

British Preliminary GDP, which is posted each quarter, was released earlier this week. The indicator looked solid in Q4 with a 0.7% gain, matching the estimate. The reading points to healthy growth in UK the economy. Last week, the pound shot up as the unemployment rate dropped to 7.1%, close to the 7.0% level which the BOE had set as a threshold for raising interest rates. The BOE minutes acknowledged that the 7.0% level would likely be reached earlier than anticipated, but this did not mean that the BOE would immediately respond with a rate hike. Nonetheless, with the UK economy continuing to show improvement, as underscored by the GDP reading, there’s little doubt that the Bank of England finds itself under increased pressure to raise interest rates.

GBP/USD for Friday, January 31, 2014

GBP/USD January 31 at 13:05 GMT

GBP/USD 1.6460 H: 1.6498 L: 1.6440

GBP/USD Technical

• GBP/USD continues to lose ground in Friday trading. The pair touched a low of 1.6440 earlier in the European session as the pound remains under pressure.
• On the downside, 1.6416 continues to provide support. This line could be tested if he pound continues to weaken. This is followed by support at 1.6329.
• 1.6549 continues to provide resistance. This is followed by resistance at 1.6705.
• Current range: 1.6416 to 1.6549

Further levels in both directions:

• Below: 1.6416, 1.6329, 1.6231 and 1.6125
• Above: 1.6549, 1.6705, 1.6964, 1.7182 and 1.7246

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Friday trading, continuing the trend we have seen since for most of the week. This is not consistent with the pair’s movement, as the pound continues to lose ground. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to improve.

The pound has been pointing downwards since Monday, losing over one cent since then. The pair is showing modest movement in the European session.

GBP/USD Fundamentals

• 13:30 US Core PCE Price Index. Estimate 0.1%.
• 13:30 US Employment Cost Index. Estimate 0.4%.
• 13:30 US Personal Spending. Estimate 0.2%.
• 13:30 US Personal Income. Estimate 0.2%.
• 14:45 US Chicago PMI. Estimate 59.8 points.
• 14:55 US Revised UoM Consumer Sentiment. Estimate 81.1 points.
• 14:55 US Revised UoM Inflation Expectations.
• 18:15 US FOMC Member Richard Fisher 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.