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GBP/USD Turns Into Sideways Amidst Bearish Pressure

January 21, 2013 5:27 am GMT+0  in Forex Fundamentals and News

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GBP/USD remains under pressureOn Friday, January 18th the currency pair had broken below the key support level of 200-day moving average. GBP/USD has been above this support level since August 28, 2012. There was a brief attempt to breach this support during mid-November but the immediate strong support had taken GBP/USD to 1.6381 which was its 17 month’s high.

During today’s Asian trading session the pair has been moving in the tight range of 1.5871 and 1.5838. 1.5838 level is slightly above November 15th’s strong support level  of 1.5828.

Today there is no economic data scheduled from the U.S. because of bank holiday for Martin L. King’s Birthday. From U.K. only Rightmove house price index for January is scheduled to be released at GMT 00:01. The previous year to year change in December was 1.4% and according to the consensus of economist a jump to 2.4% is expected as compared to previous year’s January price index.

The strong break of this key support has made the bearish sentiment strong even though the recent economic releases of last week do not throw any negative shadows over the strength of British pound.

Recent economic data from U.K. and the United States:GBP/USD relative strength - Recent economic releases

U.K:

  • RICS Housing Prices change: 0%, positive as compared to the forecasts (-8%) as well as the previous -9%.
  • Consumer price Index: Year on year change 2.7% was same as the consensus and previous release. The month on month change was 0.5% and same as the consensus and better than the previous 0.2%. Year on year core CPI was 2.4% and less than the previous 2.6%.
  • Producer Price Index: Year on year PPI for output was 2.2% and though less than the consensus of 2.4% but was slightly better than the previous 2.1%. Year on year PPI core output was same as consensus i.e. 1.5% and slightly better than the previous 1.4%.
  • Retail Sales Price Index (YoY): 3.1%, positive as compared to the forecasts as well as the previous 3.0%.
  • Retail Sales: Year on year change was 0.3% and negative as compared to the forecasts (1.1%) as well as the previous 0.9%. Same with the year on year change in retail sales ex-fuel which came out to be 1.1% against the consensus of 2.1% and previous 2.0%.

 U.S.

  • Producer price Index: Year on year PPI 1.3% was negative as compared to the forecasts (1.4%) as well as the previous 1.5%. Year on year PPI ex Food & Energy was 2.0% and negative as compared to the forecasts (2.1%) as well as the previous 2.2%. Month on month change in PPI ex food & energy remains same as the previous at 0.1% and less than the consensus of 0.2%.
  • Retail Sales: Month on month change was 0.5% and positive as compared to the forecasts (0.2%) as well as the previous 0.4%. Same with the month on month change in retail sales ex-autos which was 0.3% against the consensus of 0.2% and previous -0;1%.
  • Business Inventories: Remained same as the previous release at 0.3%.
  • Consumer Price Index: Year on year CPI 1.7%, negative as compared to the forecasts as well as the previous 1.8%. Month on month change was same as the consensus of 0.0% and slightly better than the previous -0.3%. Year on year change in CPI ex-food and energy remained same as the previous release and the consensus of 1.9%.
  • Net Long-Term TIC Flows: USD 52.3B, quite positive as compared to the forecasts (US$ 14.8B) as well as the previous -1.0B U.S. Dollar.
  • Industrial Production: Month on month change was 0.3% and though same as the consensus but quite less than the previous 1.0%.
  • Housing: Month on month housing starts was 0.945M and hence positive as compared to the forecasts (0.890M) as well as the previous 0.851M. Month on month change in new building permits came out same as the consensus of 0.903M and slightly better than the previous release of 0.899M.
  • Philadelphia Fed manufacturing Survey: -5.8, quite negative as compared to the forecasts (7.1) as well as the previous 8.1.
  • Reuter/Michigan Consumer Sentiment Index (prelim): 71.3, negative as compared to the forecasts (75.0) as well as the previous 72.9..

The economic data is in fact more in favor of GBP if we see the relative strength in graphical form as displayed on the right hand side.

As we had mentioned in the GBP/USD report updated yesterday, the pair had found a strong  support at 1.5828 on November 15, 2012, coincidentally this support level matches the support of the 50% retracement of the upward gains from 1.5269 of June 1st 2012 to the recent 1.6381 are. The 61.8% retracement of the mentioned upward movement is near 1.5695.

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Himanshu, by qualification a mechanical engineer with diversified experience of working in Europe and Asia Pacific, has been trading in Forex market for close to a decade. Himanshu also runs one of the fastest growing Forex portal ForexAbode.com which provides free Forex trading analysis, forecast & strategies, free trading tools, education, Forex Blogs and Forex Forum and contributes the analysis to financial and Forex websites like SeekingAlpha.com, MarketOracle.co.uk, ForexStreet.net, CountingPips.com, International Business Times and some more. Contact details: You may please leave your suggestions, comments or complaints using the comment form or write to us using the Contact Us page. You may also connect the author on Google at +Himanshu Jain

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