GBP/USD Forecast June 16-20

GBP/USD gained about 150 points last week, as the pair came close to the key 1.70 line before closing at 1.6961. The upcoming week is busy, highlighted by CPI. Here is an outlook for the main events moving the pound, and an updated technical analysis for GBP/USD.

The pound had a banner Thursday, soaring about 170 points after BOE Governor Mark Carney acknowledged that interest rates could increase sooner than the markets expect. In the US, there was nothing but as a wide range of economic releases, notably employment and retail sales, fell short of their estimates.

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GBP/USD graph with support and resistance lines on it. Click to enlarge:

BOE Quarterly Bulletin: Sunday, 23:01. This report provides research and analysis of market developments and the BOE’s monetary policy stance. The report is a minor event and is not likely to affect the movement of GBP/USD.
Rightmove HPI: Sunday, 23:01. This housing price index measures activity in the UK housing sector. The index has been moving upwards, and posted an impressive gain of 3.6% last month.
CPI: Tuesday, 8:30. CPI is the primary gauge of consumer inflation. The index posted a gain of 1.7%, slightly lower than the BOE’s target of 2.0%. The indicator should be treated as a market-mover which can quickly affect the movement of GBP/USD.
PPI Input: Tuesday, 8:30. Producer Price Index Input measures inflation in the manufacturing sector. The index has posted four straight declines, and the April decline of -1.1% marked a seven-month low. The estimate for the upcoming release stands at 0.1%.
RPI: Tuesday, 8:30. RPI is an important consumer inflation indicator. It includes housing costs, unlike CPI. The index has been very steady, posting two straight readings of 2.5%. The same reading is expected in the May release.
MPC Asset Purchase Facility Votes: Wednesday, 8:30. Analysts closely monitor the voting breakdown of the MPC vote on QE, which is expected to be a unanimous 9-0 decision. A non-unanimous vote indicates some dissension by policymakers as to the desirable QE level.
MPC Official Bank Rate Votes: Wednesday, 8:30. This decision is also expected to be a unanimous decision. A split vote would likely feed speculation about a rate hike by the BOE, which could result in the pound moving higher.
External BOE MPC Member Martin Weale Speaks: Wednesday, 11:15. Weale will speak at event in Belfast. The markets will be listening closely, looking for hints as to the BOE’s future monetary policy.
BOE Chief Economist Andy Haldane Speaks: Wednesday, 17:30. Haldane will deliver remarks in Scarborough. A speech which is more hawkish than expected is bullish for the British pound.
Retail Sales: Thursday, 8:30. Retail Sales is the primary gauge of consumer spending, and an unexpected reading can affect the movement of GBP/USD. The indicator posted a strong gain of 1.3% last month, crushing the estimate of 0.4%. The markets are bracing for a downturn in the upcoming release, with an estimate of -0.5%.
CBI Industrial Expectations: Thursday, 10:00. This indicator is based on a survey of manufacturers and helps analysts track the health and direction of the manufacturing sector. The indicator disappointed with a flat reading of 0 points last month, well short of the estimate of 4. The markets are expecting better news in May, with an estimate of 3 points. Will the indicator follow through with a strong improvement?
External BOE MPC Member Ian McCafferty Speaks: Thursday, 11:30. McCafferty will speak at event in London. The markets will be listening closely, looking for hints as to the BOE’s future monetary policy.
Public Sector Net Borrowing: Friday, 8:30. The deficit swelled to 9.6 billion pounds, much higher than the estimate of 3.6 billion. The markets are expecting even worse news in the upcoming release, with the estimate standing at 11.8 billion pounds.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.6807. The pair dropped to a low of 1.6738. GBP/USD then reversed directions, climbing all the way to 1.6987, as resistance at 1.6990 (discussed last week) held firm. The pair closed the week at 1.6961.

Live chart of GBP/USD:

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Technical lines from top to bottom

We start with resistance at 1.7465. This line has held firm since October 2008.

Next is 1.7375. This line marked the start of a sharp pound rally in March 2006, which saw the GBP/USD climb above 1.82 that month. 1.7180 is the next resistance line,

The pair climbed just short of 1.6990. This line is protecting the key psychological level of 1.70.

1.6823 continues to be busy and was breached again last week. The line has reverted to a support level, and is a strong line, thanks to the sharp gains made by the pound.

1.6684 is the next support line. It was an important resistance level in March and early April.

The round number of 1.6600 follows. It has remained intact since early April, which marked the start of a rally that saw the pound flirt with the 1.70 line. 1.6475 is the next support level.

The final support line for now is 1.6343. It saw some activity in early February but has provided strong support since that time.

I am neutral on GBP/USD.

The pound is once again within striking distance of the key 1.70 level, as UK numbers continue to point to a deepening recovery. The BOE continues to be coy about a rate increase, but speculation in this regard will intensify if growth indicators point higher and unemployment falls. The US economy is also moving in the right direction, although last week releases were dismal, anywhere one looked. Much will depend on what the Federal Reserve has to say in this week’s minutes.

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer. Kenny's Google Profile

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