GBP/USD

After strong gains over the Christmas holiday, the British pound reversed directions on Thursday and lost over one cent against the US dollar. GBP/USD has steadied on Friday and is trading in the mid-1.65 range. In economic news, UK Construction PMI posted a strong reading of 62.1 points, just short of the estimate of 62.3 points.

US Unemployment Claims were almost identical to the previous week, coming in at 339 thousand. This was slightly above the estimate of 334 thousand.  The markets will be keeping an eye on the year’s first Non-Farm Payrolls, which will be released next week. The NFP could impact the next Fed decision as to QE, after 2013 ended with QE tapering. While it was a small move, lowering asset purchases from $85 billion to $75 billion each month, the Fed did make a significant change its monetary policy, and this could have a significant positive impact on the US dollar.

US consumer confidence is on the rise, as November’s CB Consumer Confidence soared to 78.1 points, up from 70.4 a month earlier. This easily beat the estimate of 76.5 points. Consumer confidence is a closely watched event, as a stronger reading usually translates into increased consumer confidence, which is critical for economic growth. On Monday, US Pending Home Sales did not impress, gaining just 0.2% in November. This was well short of the forecast of 1.1%. However, the modest gain broke a string of five straight declines, so perhaps the key indicator has turned the corner on its recent downward spiral. Last week’s housing data looked much stronger, as New Home Sales beat the forecast.

GBP/USD for Friday, January 3, 2014

GBP/USD January 3 at 12:30 GMT

GBP/USD 1.6433 H: 1.6474 L: 1.6422

GBP/USD Technical

• GBP/USD has posted modest losses on Friday as the pound remains under pressure.
• 1.6476 has reverted to a resistance line as the pound trades at lower levels. This is a weak line and could face pressure during the day. This is followed by resistance at the round number of 1.6600.
• On the downside, the pair is facing resistance at 1.6300. This is followed by resistance at 1.6231.
• Current range: 1.6300 to 1.6476

Further levels in both directions:

• Below: 1.6300, 1.6231, 1.6125 and 1.6000
• Above: 1.6476, 1.6600, 1.6705, 1.6964 and 1.7182

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions in Friday trading. This is not consistent with the pair’s movement, as the pound continues to lose ground. A large majority of the open positions are short, indicative of a trader bias towards the dollar continuing its upward movement.

The pound has hit some turbulence as we begin 2014. Late in the European session on Friday, the pound remains under pressure as the dollar continues to gain ground.

GBP/USD Fundamentals

• 9:30 British Construction PMI. Estimate 62.3 points. Actual 62.1 points.
• 9:30 British Net Lending to Individuals. Estimate 2.0B. Actual 1.5B.
• 9:30 British M4 Money Supply. Estimate 0.3%. Actual 0.0%.
• 9:30 British Mortgage Approvals. Estimate 70K. Actual 71K.
• 15:30 US Natural Gas Storage. Estimate -125B.
• 16:00 US Crude Oil Inventories. Estimate -2.3M.
• All Day – US Total Vehicle Sales. Estimate 16.0M.
• 17:45 US FOMC Member Charles Plosser Speaks.
• 18:15 US FOMC Member Jeremy Stein Speaks.
• 19:30 US Fed Chairman Bernard Bernanke Speaks.

*Key releases are highlighted in bold

*All release times are GMT