GBP/USD

GBP/USD has lost ground on Friday, as the pair is trading slightly above the 1.64 line in the European session. The pound weakened in response to British Manufacturing Production, which dropped to 0.0%, a three-month low. This was well below the estimate of 0.4% As well, British BRC Retail Sales Monitor disappointed, posting a gain of 0.4%, down from 0.6% a month ago. Later in the day, we’ll get a look at UK economic growth with the release of the NIESR GDP Estimate. Over in the US, today’s highlight is the Non-Farm Employment Change. On Thursday, Unemployment Claims posted another strong reading of 330 thousand and beat the estimate.

US Non-Farm Payrolls, one of the most important economic indicators, will be released later on Friday, and we could see some markets movement as a result. There had been concern that the indicator might sag towards the end of the year, but recent NFP releases have looked strong. The past two readings have above the 200 thousand level and well above the estimates. The markets are expecting another strong release, with the December estimate standing at 196 thousand.    

It’s been an excellent start for US employment numbers in the new year. ADP Non-Farm Payrolls looked very sharp, as the key indicator climbed to 238 thousand, up from 215 thousand a month ago. This easily surpassed the estimate of 199 thousand. This was followed by another strong Unemployment Claims, which dipped to 330 thousand, beating the forecast of 337 thousand. 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.

There were no surprises from the BOE on Thursday, which set the QE and interest rate levels for January. QE remains at 375 billion pounds, while the benchmark interest rate stays at 0.50%, where it has been pegged since 2009. The BOE has said that it will not raise rates before the unemployment level falls below 7%, but with that target within reach sometime in 2014, much earlier than forecast by the BOE, the central bank may lower the unemployment rate threshold to 6.5%.

The British economy has been picking up steam, and this upturn was reflected in the quarterly BOE Credit Conditions Survey, released earlier this week. 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.

GBP/USD for Friday, January 10, 2014

GBP/USD January 10 at 12:00 GMT

GBP/USD 1.6420 H: 1.6482 L: 1.6402

GBP/USD Technical

• GBP/USD has lost ground in Friday trading. The pair dropped close to the 1.64 line in the European session, touching a low of 1.6402.
• 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 is under strong pressure and was breached earlier in the day. 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 has reversed directions, pointing to gains in short positions in Friday trading. This is reflected in what we’re seeing from the pair, as the pound has lost ground 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 continuing to move higher.

The pound has lost ground in Friday trading, and we could see further movement in the North American session, as the US releases the all-important Non-Farm Payrolls later in the day.

GBP/USD Fundamentals

• 00:01 British Retail Sales Monitor. Actual 0.4%.
• 9:30 British Manufacturing Production. Estimate 0.0%. Actual 0.4%.
• 9:30 British Industrial Production. Estimate 0.4%. Actual 0.0%.
• 13:30 US Non-Farm Employment Change. Estimate 196K.
• 13:30 US Unemployment Rate. Estimate 7.0%.
• 15:30 US Average Hourly Earnings. Estimate 0.2%.
• 15:00 US IBD/TIPP Economic Optimism. Estimate 45.3 points.
• 15:00 US Wholesale Inventories. Estimate 0.4%.
• 15:00 British NIESR GDP Estimate.

*Key releases are highlighted in bold

*All release times are GMT