The high-flying pound continues to ascend, as GBP/USD gained over one cent last week. The pair closed at 1.7059. This week’s highlights are Manufacturing Production and the BOE interest rate and QE decisions. Here is an outlook for the main events moving the pound, and an updated technical analysis for GBP/USD.
US employment numbers sparkled last week, led by Nonfarm Payrolls, which hit 288 thousand. As well, the Unemployment Rate dipped to 6.1%. In the UK, British PMIs continue to point to ongoing expansion in the construction, manufacturing and services sectors, as the recovery deepens.
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GBP/USD graph with support and resistance lines on it. Click to enlarge: 
- Halifax HPI: Monday, 7th-8th. This housing inflation index was outstanding last month, jumping to a multi-year high of 3.9%. This crushed the estimate of 0.7%. The markets are braced for a sharp downturn in the June reading, with an estimate of -0.3%.
- Manufacturing Production: Tuesday, 8:30. An unexpected reading from this key indicator can quickly affect the movement of GBP/USD. The indicator has been steady in recent readings, and is not expected to show much change in the upcoming release, with an estimate of 0.5%.
- NIESR GDP Estimate: Tuesday, 14:00. The GDP Estimate, published monthly is useful for tracking official GDP figures, which are only released each quarter. The indicator has looked solid in recent readings, and posted a gain of 0.9% in the May release.
- BRC Shop Price Index: Tuesday, 23:01. This indicator measures inflation in BRC stores. The index continues to post declines, with two straight readings of -1.4%. Another decline is likely in the June release.
- RICS House Price Balance: Wednesday, 23:01. This minor event looks at the percentage of house surveyors reporting price increases. The index has been steady and came in at 57% last month. Little change is expected in the upcoming release.
- Asset Purchase Facility: Wednesday, 23:00. The BOE has maintained its QE level at 375 billion for almost two years. The markets are not expecting any change in the July decision.
- Official Bank Rate: Wednesday, 23:00. With the UK’s economic recovery deepening, there is increased speculation about a rate hike, possibly prior to the end of the year. For the time being, the BOE is expected to keep rates at the current level of 0.50%. The MPC will release a Rate Statement announcing the July rate.
- CB Leading Index: Friday, 9:00. The index is a based on seven economic indicators but is considered a minor event since most of the data has already been released. The indicator improved to 0.5% in the May release.
* All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.7035 and dropped to a low of 1.7009. The pair then reversed directions, and climbed to a high of 1.7180, a resistance line (discussed last week). GBP/USD closed the week at 1.7159.
Live chart of GBP/USD:
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Technical lines from top to bottom
We start with resistance at 1.7624, which has provided support since March 2006. This marked the start of a stellar rally by the pound, which went on to top the 2.11 level.
The next resistance line is 1.7465. This line has held firm since October 2008. 1.7375 is the next resistance line.
GBP/USD climbed as high as resistance at 1.7180 but was unable to breach this level. It is currently a weak resistance line and could see action early in the week.
1.6989 is the first support level. It has some breathing room as the pound trades at higher levels.
1.6823 continues to provide strong support.
1.6686 is the next support line. It was an important resistance level in March and early April.
The final support level for now is the round number of 1.6600. It has remained intact since early April, which marked the start of a rally that saw the pound flirt with the 1.70 line.
I am neutral on GBP/USD.
The pound continues to look sharp and has the 1.72 level in its sights. Will the rally continue this week? US numbers have looked good since the awful GDP release, and the dollar could ride positive sentiment from an excellent NFP report, which has fueled speculation about a rate hike in the US. The situation in the UK numbers is similar, as positive data and recent remarks by the BOE have increased speculation about a rate increase.
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
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