GBP/USD – Pound in Holding Pattern Ahead of Yellen Testimony

The British pound is trading quietly on Wednesday, in sharp contrast to the stellar gains against the US dollar day earlier. In the North American session, GBP/USD is trading in the mid-1.69 range. In economic news, there is just one UK release today, RICS House Price Balance. In the US, all eyes are on Federal Reserve chair Janet Yellen, who testifies before Congress on Wednesday.

The Federal Reserve will be in the spotlight on Wednesday as Janet Yellen testifies before the Joint Economic Committee of Congress. Although recent employment data has been positive, Yellen has sounded cautious about the health of the economy, and if she reiterates these sentiments before Congress, we could see the dollar lose some ground. Meanwhile, the Federal Reserve trimmed its QE program by $10 billion last week. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending, of course, on the strength of the US economy and the job market.

British PMIs continue to look strong, indicative of ongoing expansion throughout the British economy. Services PMIs climbed to 58.7 points, marking a four-month high. This easily beat the estimate of 57.9 points. Last week, Manufacturing PMI came in at 57.3 points, easily beating the estimate of 55.4 points. Construction PMI remained high at 60.8 points, although this did fall short of the forecast of 62.2 points.

GBP/USD for Wednesday, May 7, 2014

GBP/USD May 7 at 15:35GMT

GBP/USD 1.6965 H: 1.6986  L: 1.6856

GBP/USD Technical

• GBP/USD is flat in Wednesday trade.
• On the upside, 1.70 remains under pressure. The next resistance line is at 1.7210.
• 1.6896 is providing strong support.

Further levels in both directions:

• Below: 1.6896, 1.6765, 1.6705 and 1.6549
• Above: 1.70, 1.7210, 1.7374 and 1.7538

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions in Wednesday trading, continuing the trend seen a day earlier. This is consistent with the movement of the pair, as the pound has edged lower. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias to the dollar moving upwards.

GBP/USD is trading close to the key 1.70 level. The pair is steady in the North American session.

GBP/USD Fundamentals

• 12:30 US Preliminary Nonfarm Productivity. Estimate -0.9%. Actual -1.7%
• 12:30 US Preliminary Unit Labor Costs. Estimate 2.3%. Actual 4.2%.
• 14:00 Federal Reserve Chair Janet Yellen Testifies Before Joint Economic Committee of Congress.
• 14:30 US Crude Oil Inventories. Estimate +0.9M. Actual -1.8M.
• 17:01 US 10-year Bond Auction.
• 19:00 US Consumer Credit. Estimate 15.4B.
• 23:01 British RICS House Price Balance. Estimate 55%.

*Key releases are highlighted in bold

*All release times are GMT

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