GBP/USD – Almost Unchanged as US Posts Solid Data

After posting gains throughout the week at the expense of the US dollar, the pound is almost unchanged in Thursday trading. In the North American session, the pound is trading in the mid-1.56 range. The pair has shrugged off strong US employment and retail sales numbers which were released earlier in the day. The sole UK release was a speech in Helsinki by BOE Deputy Governor Paul Tucker.

It’s been a quiet week up until now for US events, but that changed on Thursday, as the US posted three key releases. Retail Sales jumped from 0.1% to 0.6%, surpassing the estimate of 0.4%. Core Retail Sales also climbed nicely, from -0.1% to 0.3%. This matched the market forecast.  There was more good news as Unemployment Claims fell to 334 thousand, crushing the estimate of 354 thousand. If the US can put together additional solid numbers, it could be a sign that the recovery is deepening.

Earlier this week, the US got some good news from the S&P ratings agency, as the well-respected firm revised the US sovereign credit rating from negative to stable. This is an important vote of confidence in the US economy, and means that there is less than a 1 in 3 chance of another downgrade in the next two years. S&P noted that a key factor in its revision was the agreement reached in the US Congress which averted the fiscal cliff crisis, which would have led to $600 billion in automatic tax increases and spending cuts and could have pushed the fragile US economy into recession. In 2011, S&P cut the US credit rating from AAA to AA, and the threat of another downgrade has been a concern of the markets. This news will likely improve market sentiment and could give a boost to the US dollar.

The S&P decision is not only bullish for the dollar, but could also affect the US Federal Reserve’s QE program, which involves the purchase of $85 billion in assets each month. The Fed has said that it won’t scale back the program before it sees a stronger economy and an improving employment picture. Although US releases continue to be mixed, speculation is rising that the Fed could take action in the next few months. Since QE is US dollar-negative, any tapering of QE could give a boost to the greenback and jolt the currency markets.

GBP/USD for Thursday, June 13, 2013

GBP/USD June 13 at 15:30 GMT

GBP/USD 1.5644 High: 1.5700 L: 1.5670

GBP/USD Technical

The pound has settled down on Thursday, after a week of solid gains against the broadly weak US dollar. The pair moved as high as the 1.57 line in the Asian session, but was unable to sustain this momentum, and retracted to the mid-1.56 range. 1.57 is providing weak resistance, and could face pressure during the day from the surging pound. The next line of resistance is at the round number of 1.58. On the downside, GBP/USD continues to receive support at 1.5557. This is followed by a strong support level at 1.5432.

• Current range: 1.5557 to 1.5700

Further levels in both directions:

• Below: 1.5557, 1.5432, 1.5309, 1.5203 and 1.5111
• Above: 1.5700, 1.580, 1.5869 and 1.5916

OANDA’s Open Positions Ratio

GBP/USD ratio continues to point to an increase in short positions. This trend has continued since the beginning of June, when the majority of positions were long. Currently, short positions now enjoy a majority. This is consistent with the movement of GBP/USD, as the pound has posted sharp gains this month; this has resulted in a large number of long positions have been covered, thus reducing the number of open long positions. The shift in open positions means that that trader sentiment is now biased towards the pair undergoing a correction and moving downwards.

The pound continues to look strong ,and tested the 1.57 line earlier. Perhaps surprisingly, the pair has not reacted to strong US numbers earlier on Thursday. The US will release key consumer confidence numbers on Friday, so we could see more activity from the pair before the end of the week.

GBP/USD Fundamentals

• 12:15 BOE Deputy Governor Paul Tucker Spoke in Helsinki
• 12:30 US Core Retail Sales. Estimate 0.3%. Actual 0.3%
• 12:30 US Retail Sales. Estimate 0.4%. Actual 0.6%
• 12:30 US Unemployment Claims. Estimate 354K. Actual 334K 
• 12:30 US Import Prices. Estimate 0.0%. Actual -0.6%
• 14:00 US Business Inventories. Estimate 0.3%. Actual 0.3%
• 14:30 US Natural Gas Storage. Estimate 96B.
• 17:00 US 30-year Bond Auction

*Key releases are highlighted in bold

*All release times are GMT

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