GBP/USD – Pound Loses Ground Despite Strong UK Sales Numbers

The pound has dropped in Monday trading, as GBP/USD was trading in the mid-1.53 range in the North American session. The UK started off the week on a bright note, as CBI Realized Sales hit a six-month high. In the US, today’s only release was Pending Home Sales, and the key indicator declined, although it did beat expectations.

British CBI Realized Sales started off the week in style. The index, which is based on a survey of retailers and wholesalers, climbed from 1 point all the way to 17, easily beating the estimate of 11 points. It was the indicator’s best performance since January. The strong reading is a sign of increased consumer spending, which is critical for the UK economy to get back on track.

The markets got another look at US housing numbers on Monday, and the picture certainly seems a confusing one. Earlier today, Pending Home Sales declined by 0.4%, ending a steak of three consecutive gains. However, this figure was considerably better than the estimate of -1.1%. Last week, Existing Home Sales dropped from 5.18 million to 5.08 million, way off the forecast of 5.27 million. However, New Home Sales soared on Wednesday, jumping from 476 thousand to 496 thousand, well above the estimate of 482 thousand. This was the key housing indicator’s best performance in five years. So what to make of this key releases, which are pointing in all directions? It looks like the markets will have to wait for the August housing releases to get a better handle on the direction of the US housing industry.

US consumer confidence is very high, at least according to UoM Consumer Sentiment, which was released on Friday. The indicator rose from 84.1 to 85.1 points, its highest level since July 2007. US consumers are clearly feeling good about the economy, but will this translate into stronger spending and more jobs? The markets will have to wait for data from these and other sectors to see if a happier consumer is indeed leading to greater economic activity.

GBP/USD for Monday, July 29, 2013

GBP/USD July 29 at 15:05 GMT

GBP/USD 1.5340 H: 1.5413 L: 1.5329

GBP/USD Technical

GBP/USD has lost some ground on Monday. The pair dropped below the 1.54 line in the European session and has moved into the mid-153 range. GBP/USD continues to receive support at 1.5309. This is not a strong line, and could face pressure if the current downward swing continues. The next support line is at 1.5203, protecting the 1.52 line. On the upside, the pair faces resistance at 1.5432. This line has held firm since late June. 1.5527 is the next resistance line.

• Current range: 1.5309 to 1.5432

Further levels in both directions:

• Below: 1.5309, 1.5203, 1.5111, 1.5000, 1.4896 and 1.4781
• Above: 1.5432, 1.5527, 1.5645 and 1.5756

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to movement towards long positions. This is not reflected in what we are seeing from the pair, as the pound has lost ground in Monday trading. Short positions make up a majority of the ratio, a sharp contrast to what we saw in early July, when long positions dominated. This is indicative of a slight bias in favor of the pound posting gains against the dollar.

The pound has been pointing upwards for most of the past two weeks, but the US dollar has drawn blood first on Monday. The pound failed to take advantage of weak US housing numbers and a strong UK sale release. We could see the pair settle down and continue to trade in the mid-1.53 range.

GBP/USD Fundamentals

• 10:00 British CBI Realized Sales. Estimate -11 points. Actual -17 points.
• 14:00 US Pending Home Sales. Estimate -1.1%. Actual -0.4%.

*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.