GBP/USD for Monday, March 10, 2014
The last few days of last week saw the GBP/USD continue to edge higher back towards the short term resistance level at 1.6750. Just above that level is the resistance level at 1.68 which continues to loom large and ready to offer an obstacle to higher prices. Earlier last week the pound fell sharply away from the resistance level at 1.6750 and rest on a support level around 1.6650 before rallying higher again. Over the last few weeks the GBP/USD has received solid support from the key 1.66 level after it retraced strongly from the resistance level at 1.68 and over the last couple of weeks it had been edging higher slowly placing upwards pressure on a short term resistance level at 1.6750. In early February, the pound enjoyed a very healthy time moving well from the support level at 1.6250 through 1.6450 before pushing on to the multi-year high above 1.680.
In late January the pound fell sharply and experienced its worst one week fall this year which resulted in it moving to the six week low near the support level at 1.6250. Over the last few months the pound has established and traded within a trading range roughly around the key level of 1.6450, whilst moving down to support at 1.6250 and up to 1.66 and beyond. The 1.66 level has become quite significant and has loomed large throughout this year providing some resistance to higher prices. This level has resurfaced again as one of significance and it is now providing solid support. In late November it did well to break through the long term resistance level at 1.6250 which had established itself as a level of significance over the last few months. This level continues to play a role in providing support. In early November, the pound bounced strongly off the support level at 1.59 to return back to above 1.6250.
Towards the end of October the GBP/USD slowly drifted lower from the strong resistance level at 1.6250 and down to a three week low just around 1.5900 which was recently passed as the pound moved down towards 1.5850 only a week ago. For the week or so before that the pound moved well from the key level at 1.60 back up to the significant level at 1.6250, only again for this level to stand tall and fend off buyers for several days. Throughout September the pound rallied well and surged higher to move back up strongly through numerous levels which was punctuated by a push through to its highest level for the year just above 1.6250 several weeks ago. In the first week of October the pound was easing back towards 1.60 and 1.59 where it established a narrow trading range between before surging back to 1.6250 again.
The problem with recoveries after a deep recession is a lot of the good news peters out rather quickly. The easy gains are made early on and then you are left assessing the irreparable damage that was done by the downturn. And that is the nub of the FT report: grim reading for chancellor George Osborne as he puts the finishing touches to his 19 March budget. According the FT's analysis of models by the Office for Budget Responsibility, austerity may have to last a year longer than expected because the government will not be able to rely on economic recovery to eliminate part of the deficit. The FT's economics editor, Chris Giles, has identified the new black hole by focusing on the difference between the actual deficit (the gap between government expenditure and income such as taxes), which is on course to be around £111bn in 2013-14, and the cyclically adjusted deficit (the gap that is left when the peaks and troughs of the economic cycle are taken out of the equation), due to be £85bn this financial year. Osborne had assumed he would need to target the lower figure.
GBP/USD Daily chart" title="GBP/USD Daily chart" height="228" width="474">
GBP/USD 4 hourly chart" title="GBP/USD 4 hourly chart" height="230" width="474">
GBP/USD March 10 at 01:15 GMT 1.6738 H: 1.6741 L: 1.6715
GBP/USD Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1.6600 | 1.6300 | 1.6250 | 1.6750 | 1.6800 | --- |
During the early hours of the Asian trading session on Monday, the GBP/USD is trying to edge a little higher back towards 1.6750 after dropping sharply to finish out last week. Current range: Trading just below 1.6750 around 1.6740.
Further levels in both directions:
• Below: 1.6600, 1.6300, and 1.6250
• Above: 1.6750 and 1.6800.
OANDA's Open Position Ratios
GBP/USD Open Position Ratios" title="GBP/USD Open Position Ratios" height="27" width="474">
(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 back below 30% again as the GBP/USD rallies a little towards 1.6750 again. Trader sentiment remains in favour of short positions.
Economic Releases
- 23:50 (Sun) JP Bank Lending Data (Feb)
- 23:50 (Sun) JP Current Account (Jan)
- 23:50 (Sun) JP GDP (Final) (Q4)
- 09:30 EU Sentix Indicator (Mar)
- 12:15 CA Housing starts (Feb)
- EU and US hold Trade Talks in Brussels (to 14th)