Whilst the GBP/USD did well to climb off the canvas a little and move back above 1.49 and towards 1.50 again a couple of days ago, the last 24 hours have seen the pound reverse and head back down below 1.49 to reach a new multi-year low near 1.48. It experienced sharp falls to close out last week moving from 1.53 down to the key long term level of 1.50 and then through 1.49. This recent movement has seen it resume its already well established medium term down trend from the last few weeks and move it to a four month low. Over the last few weeks, it has moved back from above 1.57 and fallen strongly. Throughout the first half of June, it enjoyed its best run in a long time as it surged from 1.50 to 1.57 in just a few weeks.
Its multiple key levels during its movement up towards 1.57 have appeared to have little impact during its recent decline, although 1.52 seemed to halt the decline a little over the the last week or so. The pound has now completely reversed its fortunes from the strong first half of June which saw it climb so strongly from 1.50 up to the four month highs above 1.57. Throughout the month of May the pound fell strongly and returned almost all of its gains from the few weeks before that. In early March the pound moved to new lows around 1.4830 from a starting point near 1.64 at the beginning of the year.
This week’s sole major event out of the UK, Manufacturing Production, posted a drop of 0.8%, confounding the markets, which had anticipated a gain of 0.3%. The dismal news continued as Industrial Production slipped to a flat 0.0%, missing the estimate of 0.3%. Trade Balance brought no relief, as the deficit swelled from -8.2 billion pounds to -8.5 billion. The silver lining was the NIESR GDP Estimate, which provides a monthly look at GDP. The indicator posted a respectable gain or 0.6%, matching the June release.
Meanwhile, there was some good news for the UK, as the International Monetary Fund revised its forecast of UK growth in 2013. The IMF said that the economy would grow by 0.9% this year, compared with an earlier forecast of 0.6%. This marks the first major upgrade of the UK’s economic outlook in almost three years, and is welcome news for the government, which has implemented austerity measures in an attempt to get its fiscal house in order. The IMF has not been very positive about the UK economy, and an IMF official downplayed the revision, saying that economic growth still remains weak.
GBP/USD July 10 at 03:55 GMT 1.4867 H: 1.4980 L: 1.4813
During the early hours of the Asian trading session on Wednesday, the GBP/USD is consolidating in a narrow trading range right around 1.4860 after having recently dropped sharply from around 1.4980. Since the middle of June the pound has fallen very strongly from the resistance level at 1.57 back down towards the long term key level at 1.50. Current range: Right around 1.4860.
Further levels in both directions:
• Below: 1.4850.
• Above: 1.4980.
(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 has moved to back above 60% as the GBP/USD has fallen sharply back to near 1.49. Trader sentiment remains in favour of long positions.
Economic Releases
- 00:30 AU Westpac Consumer Confidence (Jul)
- 05:00 JP Consumer Confidence (Jun)
- 14:00 US Wholesale Inventories (May)
- US Fed releases minutes from prior (Jun 18-19) FOMC meeting