GBP/USD for Thursday, December 19, 2013
The GBP/USD has continued its slide from the last week and reached a three week low but at the same time it has returned to a likely support level at 1.6250 which was solid resistance for some time. The pound didn't enjoy last week very much as it returned all of its gains from the previous couple of weeks which had it moving from down below 1.6250 to the present resistance level at 1.6450. Over the last few days it has been content to consolidate around the 1.63 level and move very little before dropping lower in the last 24 hours. A few weeks ago it did well to break through the long term resistance level at 1.6250 which had established itself as a level of significance over the last few months. Prior to that the pound had bounced strongly off the support level at 1.59 to return back to its present levels. Towards the end of October the GBP/USD slowly drifted lower from the strong resistance level at 1.6250 and down to a three week low just around 1.5900 which was recently passed as the pound moved down towards 1.5850 only a week ago. For the week or so before that the pound moved well from the key level at 1.60 back up to the significant level at 1.6250, only again for this level to stand tall and fend off buyers for several days. Throughout September the pound rallied well and surged higher to move back up strongly through numerous levels which was punctuated by a push through to its highest level for the year just above 1.6250 several weeks ago. In the first week of October the pound was easing back towards 1.60 and 1.59 where it established a narrow trading range between before surging back to 1.6250 again.
Back in the middle of August the pound surged higher to through the resistance level at 1.56 to a then two month high around 1.5650, before spending the next few days consolidating and trading within a narrow range around 1.5650, receiving support from the key 1.56 level. A couple of months ago the resistance level at 1.54 was proving to be quite solid, and once it broke through the pound surged higher to a new seven week high near 1.56 in a solid 48 hour period run. In the week leading up to this the pound had recovered strongly and returned to the previous resistance level at 1.54 after the week earlier undoing some of its good work and falling away sharply from the resistance level at 1.54 back down to around 1.5150 and a two week low. A few weeks ago the 1.54 resistance level stood firm and the pound fell away heavily, however the 1.51 support level proved decisive and helped the pound rally strongly.
Earlier in July after having done very little for about a week, the GBP/USD started to move and surge higher and move through the 1.52 and 1.53 levels to the one month high above 1.54. Prior to the move higher, it moved very little as it found solid support at 1.51 and traded within a narrow range above this level. It established a trading range in between 1.51 and 1.52 after it took a breather from its excitement just prior when it experienced a strong surge higher moving back to within reach of the 1.52 level from below 1.49, all in 24 hours. About a month ago it did well to climb off the canvas and move back above 1.49 and towards 1.50 again before seeing the pound reverse and head back down below 1.49 to reach a new multi-year low near 1.48. It experienced sharp falls moving from 1.53 down to the key long term level of 1.50 and then through 1.49. That movement saw it resume its already well established medium term down trend from the second half of June and move it to a four month low.
British employment numbers looked sharp on Wednesday. Employment Change continues to post sharp drops, a pattern which we've seen since mid-2013. The key indicator came in at -36.7 thousand, beating the estimate of -35.2 thousand. The unemployment rate dropped unexpectedly to 7.4%, its lowest level since May 2009. The markets had expected the rate to remain unchanged at 7.6%. Meanwhile, the breakdown of the BOE's vote on QE and the Official Bank Rate were both unanimous (9-0) decisions. At the last policy meeting, the Bank maintained QE at 375 billion pounds and the Official Bank rate at 0.50%. There was more good news as CBI Realized Sales jumped to 34 points in November, up sharply from 1 point the month before. This indicates that consumer spending, a critical component of economic growth, is on the rise. On Tuesday, British CPI, one of the most important economic events, dropped to 2.1%, down from 2.2% a month earlier. This was the index's lowest level since December 2009. Although the drop was a minor one, the trend has been downward since June. On a more positive note, the reading of 2.1% is closer to the BOE inflation target of 2.0%.
GBP/USD Daily Chart" title="GBP/USD Daily Chart" height="228" width="550">
GBP/USD 4 Hourly Chart" title="GBP/USD 4 Hourly Chart" height="228" width="550">
GBP/USD December 18 at 22:30 GMT 1.6377 H: 1.6484 L: 1.6274
During the early hours of the Asian trading session on Thursday, the GBP/USD is trying to settle a little after some wild swings to well above 1.6450 and then back down below 1.64 in the last few hours. To start this year the pound fell very strongly from near 1.64 down to below 1.50 however the second half of the year has seen it recover strongly and move beyond 1.64 to new highs. Current range: Just above the support level at 1.6250 around 1.6270.
Further levels in both directions:
• Below: 1.6250, 1.6150 and 1.5900.
• Above: 1.6450.
GBP/USD Open Position Ratios" title="GBP/USD Open Position Ratios" height="228" width="550">
(Shows the ratio of long vs. short positions held for the GBP/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)
The GBP/USD long positions ratio remains well below 30% as the GBP/USD eases back from 1.6450. Trader sentiment remains heavily in favour of short positions.
Economic Releases
- 21:45 (Wed) NZ GDP (Q3)
- 04:30 JP All Industry activity index (Oct)
- 05:00 JP Leading indicator (Final) (Oct)
- 09:00 EU Current Account (Oct)
- 09:30 UK Retail Sales (Nov)
- 13:30 US Initial Claims (13/12/2013)
- 15:00 US Existing home sales (Nov)
- 13:30 US Housing Starts (Sep, Oct & Nov)
- 15:00 US Leading Indicator (Nov)
- 15:00 US Philadelphia Fed Survey (Dec)
- EU European Council Meeting (to 20 Dec)