GBP/USD

After a lackluster week, the British pound has posted some strong gains against the US dollar in Wednesday trading. GBP/USD is trading in the mid-1.64 in the North American session. The pound took advantage of an excellent ADP Non-Farm Payrolls release, as the indicator posted a tw0-year high. In the UK, Halifax HPI disappointed with a decline of 0.6%, well below the estimate. As well, the BOE released its quarterly Credit Conditions Survey.

With the markets keeping a close eye on US employment releases, December’s ADP Non-Farm Payrolls looked excellent. The key indicator climbed to 238 thousand, up from 215 thousand a month ago. This easily surpassed the estimate of 199 thousand. We’ll get a look at Unemployment Claims on Thursday, followed by the all-important Non-Farm Payrolls on Friday. With another QE taper in January a strong possibility, every employment release will be under the market microscope and could impact on the currency markets.

The British economy has been picking up steam, and this upturn was reflected in the BOE Credit Conditions Survey, which the Bank releases each quarter. The report found that mortgage loans were up significantly in the last quarter of 2013, and that British lenders expect a significant increase in the availability of mortgages and business loans in the first quarter of 2014. An increase in consumer and business credit levels should translate into more spending and fuel economic activity.

As expected, the US Senate confirmed Susan Yellen as chair of the Federal Reserve by a wide margin on Monday. Yellen becomes the first woman to head the powerful central bank. She has been a strong supporter of outgoing chair Bernard Bernanke, who lowered interest rates and implemented a QE program in order to boost a struggling US economy. Yellen takes over the helm of the Federal Reserve on February 1 and will chair her first policy meeting in March.

GBP/USD for Wednesday, January 8, 2014

GBP/USD January 8 at 16:20 GMT

GBP/USD 1.6458 H: 1.6471 L: 1.6377

GBP/USD Technical

• GBP/USD is showing upward movement in Wednesday trading. The pair crossed above the 1.64 line in the Asian session and has continued to climb higher.
• 1.6549 is the next line of resistance. This is followed by resistance at 1.6705, which has remained intact since May 2011.
• On the downside, 1.6416 has reverted to a support level as the pound pushes higher. This is not a strong line and could face pressure if the pound retracts. This is followed by stronger support at 1.6329.
• Current range: 1.6416 to 1.6549

Further levels in both directions:

• Below: 1.6416, 1.6329, 1.6231, 1.6125 and 1.6000
• Above: 1.6549, 1.6705, 1.6964 and 1.7182

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in Wednesday trading, continuing the trend we have seen throughout the week. This is not reflected in what we’re seeing from the pair, as the pound has posted gains against the dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar reversing directions and moving to higher ground.

The pound has posted gains on Wednesday. The pair started off the North American session with some gains, but has since backtracked. We could see some strong movement later in the day, as the US releases the minutes of the most recent Federal Reserve policy meeting.

GBP/USD Fundamentals

• 00:01 British BRC Shop Price Index. Actual -0.8%.
• 7:59 British Halifax HPI. Estimate 0.6%. Actual 0.6%.
• 9:30 British BOE Credit Conditions Survey.
• 13:15 US ADP Non-Farm Employment Rate. Estimate 199K. Actual 238K.
• 15:30 US Crude Oil Inventories. Estimate -1.6M. Actual -2.7B.
• 18:01 US 10-year Bond Auction.
• 19:00 US FOMC Meeting Minutes.
• 20:00 US Consumer Credit. Estimate 14.8B.

*Key releases are highlighted in bold

*All release times are GMT