GBP/USD – Pound Lower in Thin Trading

The British pound continues to lose ground on Monday. The pair has dropped below the 1.60 line, as the dollar continues to put pressure on the British currency. The pound has now lost over 100 points since Thursday against the US dollar. We can expect thin trading on Monday, as the US markets are closed for a holiday and there are no British releases. On Friday, US Non-Farm Payrolls surged, pushing the pair higher. However, US Preliminary U0M Consumer Sentiment was a disappointment, slipping to an eight-month low.

Over in the US, the markets had very low expectations from Non-Farm Payrolls, one of the most important economic indicators. The estimate for the October release stood at just 121 thousand, as there was concern that the reading would be artificially low due to the government shutdown in October. However, the indicator put those concerns to rest, as the indicator soared to 204 thousand, its highest level in eight months. The outstanding NFP figure bolstered the US dollar against the major currencies, and has increased speculation that the Fed might press the tapering trigger in December. Such talk could bolster the US currency, as a reduction in QE is bullish for the dollar. At the same time, speculation about a scaling down in QE introduces some uncertainty and volatility in the currency markets.

The BOE set interest rates and QE levels on Thursday and there were no surprises. The benchmark interest rate was kept at 0.50%, while asset purchase facility was maintained at 375 billion pounds. The BOE has pegged interest rates at 0.50% since 2009 and Governor Mark Carney has said that the Bank would not lower rates before the unemployment rate falls below 7.0%. Currently, unemployment is at 7.7%. The Bank is forecasting that we won’t reach that point prior to 2016, but with British economic indicators continuing to point upwards, many investors feel that this target will be reached much sooner.

GBP/USD for Monday, November 11, 2013

GBP/USD November 11 at 16:10 GMT

GBP/USD 1.5970 H: 1.6022 L: 1.5966

GBP/USD Technical

• GBP/USD continues to point downwards. The pair dropped below the key 1.60 line in the European session and continues to lose ground in North American trading.
• 1.6000 has reverted to a resistance line. This is a weak line which could see more activity during the North American session. There is stronger resistance at 1.6125.
• GBP/USD is receiving support at 1.5877. This is followed by a support level at 1.5756, which has held firm since mid-September.
• Current range: 1.5877 to 1.6000.

Further levels in both directions:

• Below: 1.5877, 1.5756 and 1.5645 and 1.5537
• Above: 1.6000, 1.6125, 1.6231, 1.6300 and 1.6476

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to movement towards short positions in Monday trading, continuing the trend which began early last week. This is reflected in the current movement of the pair, as the pound has lost more ground to the dollar. Short positions continue to dominate the open positions, reflecting a trader bias towards the US dollar continuing to move to higher ground.

The pound is struggling, and a strong PMI on Monday was not enough to reverse the slide. With no releases out of the UK or the US on Monday, we can expect limited movement from GBP/USD during the North American session.

GBP/USD Fundamentals

• There are no British or US releases on Monday.

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.