GBP/USD Gets Pounded Below $1.5300 as USD Rally Continues

Kevin Jin

THE TAKEAWAY: GBP Gross Domestic Product (YoY) (1Q F) +0.3% versus +0.6% expected, from +0.6% > EUR German Unemployment Rate (JUN) 6.8% versus 6.9% expected, from 6.8% (revised down from 6.9%) > GBPUSD falls down to $1.5200

There were several economic data releases today which influenced FX trading. The first was a better than expected German Unemployment Rate print: 6.8% actual; 6.9% expected (Bloomberg News survey). The next European data release was out of Britain, with the final print of 1Q YoY GDP coming in at +0.3%, lower than the +0.6% expected (Bloomberg News survey). In North America, the US reported Initial Jobless Claims that came roughly in line with expectations: +346K actual versus +345K expected (Bloomberg News survey), from +355K (revised up from +354K). Markets showed a muted reaction to the jobless claims data. On the other hand, Pending Home Sales YoY numbers came in much better than expected, which set the USD rally off: +12.5% actual versus +8.3% expected (Bloomberg News survey), from 12.9% (revised down from 13.9%). The Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) gains net +28 (+0.26%) on the day to 10792 at the time of writing.

Two voting Fed members also commented today on last week’s FOMC decision. NY Fed President William Dudley mainly reiterated FOMC Chairman Ben Bernanke’s main points last week about QE purchasing ending around 7% unemployment. Dudley also mentioned that QE may be prolonged if the economy misses Fed forecasts. Board of Governors Jerome Powell emphasized the data contingency of QE tapering and stated that he sees asset purchases continuing “for some time.”

Global market worries are continuing to diffuse today after a rough stretch last week. The CBOE Volatility Index (VIX), which measures the implied volatility in the S&P 500, falls -3.02% today to 16.69 at the time of writing. A broad look at the various asset classes today shows black across the board with commodities, equities, and bonds all posting sizeable gains. Crude oil increases on the day while non-European-traded base metals also pare some of its previous losses: WTI +1.36%; Brent +1.07%; COMEX Copper +0.54%; Shanghai Copper +0.21%; LME Copper -0.88% at the time of writing. Equities are performing well across the globe: S&P +0.77%; Euro Stoxx +0.85%; FTSE +1.34%; Nikkei +2.96%; Hang Seng +0.50% at the time of writing. Global bond markets are faring well with 10YR government bond yields falling: Germany -3.9bps (-2.20%) to 1.726%; Italy -13.0bps (-2.76%) to 4.566%; US -3.5bps (-1.38%) to 2.500%; Singapore -11.4bps (-4.49%) to 2.423% at the time of writing.

AUDUSD 15-minute Chart: June 27, 2013

GBPUSD_Gets_Pounded_Below_1.5300_as_USD_Rally_Continues_body_Picture_4.png, GBP/USD Gets Pounded Below $1.5300 as USD Rally Continues
View photos
GBPUSD_Gets_Pounded_Below_1.5300_as_USD_Rally_Continues_body_Picture_4.png, GBP/USD Gets Pounded Below $1.5300 as USD Rally Continues

Charts Created using Marketscopeprepared by Kevin Jin

The AUDUSD is trading net neutral on the day after a run up to the weekly central pivot at $0.9338. These Asian session gains were not sustained as the pair crept back down to .9300 during most of the London session. The pair started selling off around 14:00 GMT (10:00 EDT on chart above), which was immediately after the positive US home sales data and while Fed member Dudley was speaking.

GBPUSD 15-minute Chart: June 27, 2013

GBPUSD_Gets_Pounded_Below_1.5300_as_USD_Rally_Continues_body_Picture_3.png, GBP/USD Gets Pounded Below $1.5300 as USD Rally Continues
View photos
GBPUSD_Gets_Pounded_Below_1.5300_as_USD_Rally_Continues_body_Picture_3.png, GBP/USD Gets Pounded Below $1.5300 as USD Rally Continues

Charts Created using Marketscopeprepared by Kevin Jin

The GBPUSD is trading mostly weaker today, down -81 pips (-0.52%) to $1.5231 at the time of writing. The pair traded light throughout the London session before slamming down past 1.5300 after the disappointing GDP print. After a failed run back up to 1.5300 at New York Open, the GBPUSD continued to move lower after good US home sales data. The pair eventually met support at 1.5200 and trades slightly higher off that level at the time of writing.

EURUSD 15-minute Chart: June 27, 2013

GBPUSD_Gets_Pounded_Below_1.5300_as_USD_Rally_Continues_body_Picture_2.png, GBP/USD Gets Pounded Below $1.5300 as USD Rally Continues
View photos
GBPUSD_Gets_Pounded_Below_1.5300_as_USD_Rally_Continues_body_Picture_2.png, GBP/USD Gets Pounded Below $1.5300 as USD Rally Continues

Charts Created using Marketscopeprepared by Kevin Jin

The EURUSD is barely positive today, gaining +8 pips (+0.06%) to $1.3018 at the time of writing. Volatility in the EURUSD was actually fairly muted today with the pair moving in a 50 pip range between 1.3000 and 1.3050. The pair has declined greatly in the last week, but the market is showing some pause before deciding whether it wants to bring the EURUSD below the psychologically critical 1.3000 level.

USDJPY 15-minute Chart: June 27, 2013

GBPUSD_Gets_Pounded_Below_1.5300_as_USD_Rally_Continues_body_Picture_1.png, GBP/USD Gets Pounded Below $1.5300 as USD Rally Continues
View photos
GBPUSD_Gets_Pounded_Below_1.5300_as_USD_Rally_Continues_body_Picture_1.png, GBP/USD Gets Pounded Below $1.5300 as USD Rally Continues

Charts Created using Marketscopeprepared by Kevin Jin

The USDJPY is the strongest performing currency pair out of the major FX pairs today, gaining +52 pips (+0.53%) to ¥98.22 at the time of writing. After consolidating throughout most of the Asian session, the pair moved briskly higher past 98.00 not long before London Open. The pair continued to edge higher up to 98.50 before meeting some resistance and heading lower. Although volatility in the USDJPY picked up somewhat today, note the Japanese Consumer Price Index data at 23:30 GMT later today may create even larger moves in this pair.

--- Written by Kevin Jin, DailyFX Research

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