GBP/USD remained at high levels this week, breaking above the 1.70 level and hitting its highest level since October 2008. The pair closed the week at 1.7009. This week’s highlights are testimony by Mark Carney before a parliamentary committee and Current Account. Here is an outlook for the main events moving the pound, and an updated technical analysis for GBP/USD.
In the US, the Federal Reserve said interest rates would remain at low levels for the foreseeable future. Unemployment Claims and the Philly Manufacturing Index both improved in May. In the UK, CPI and Retail Sales softened in May, although manufacturing data improved sharply. GBP/USD pushed into 1.70 territory, hitting its highest levels in almost six years.
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GBP/USD graph with support and resistance lines on it. Click to enlarge: 
- BOE Credit Conditions Survey: Monday, 8:30. This report is released each quarter, and provides important data regarding lending to the private sector. Increased borrowing by consumers and businesses usually translates into stronger spending, which is critical for economic growth.
- BOE Governor Mark Carney Speaks: Tuesday, 8:30. Carney will be speaking at Parliament’s Treasury Committee Hearing. The markets will be looking for clues as to the BOE’s future monetary policy.
- BBA Mortgage Approvals: Tuesday, 8:30. Mortgage Approvals are an important gauge of activity in the housing sector, as home buyers usually take out a mortgage to finance the purchase. The indicator has been falling throughout 2014, and dropped to 42.2 thousand last month, shy of the estimate of 45.2 thousand. The downward trend is expected to continue, with the estimate for the upcoming release at 41.3 thousand.
- Nationwide HPI: Wednesday, 25th-2nd. This housing inflation index dropped to 0.7% in April, matching the forecast. The markets are expecting an identical gain in May.
- CBI Realized Sales: Wednesday, 10:00. Realized Sales is an important gauged of consumer spending. The indicator has shown some strong volatility, resulting in market estimates that are often well off the mark. In April, the indicator dropped to 16 points, well short of the estimate of 36 points. The markets are expecting a strong improvement in the upcoming release, with an estimate of 25 points.
- BOE Financial Stability Report: Thursday, 9:30. This semi-annual report examines the stability of the current financial system as well as well as risks to the system. Governor Mark Carney will host a press conference, and any unexpected remarks could affect GBP/USD.
- GfK Consumer Confidence: Thursday, 23:05. The indicator has pointed to pessimism on the part of the British consumer, with readings below zero for a prolonged period of time. However, the indicator has been moving higher in 2014, and managed to rise to the zero level last month. The upward trend is expected to continue in the May reading, with the estimate standing at 2 points.
- Current Account: Friday, 8:30. Current Account measures the difference between imported and exported goods and services. The current account deficit continues to swell and rose to -22,4 billion pounds, way above the estimate of -13.5 billion. The markets are expecting some improvement in the upcoming release, with an estimate of -17.1 billion.
- Final GDP: Friday, 8:30. GDP is the primary gauge of economic activity, and traders should treat this indicator as a market-mover. The indicator has been quite steady in recent readings and posted a gain of 0.7% in Q4 of 2103,, matching the estimate. The markets are expecting another strong gain in Q1, with the estimate standing at 0.8%.
* All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.6977 and dropped to a low of 1.6919. The pair then reversed directions, blasting past resistance at 1.6990 (discussed last week) and climbing to a high of 1.7063. The pair closed the week at 1.7009.
Live chart of GBP/USD:
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Technical lines from top to bottom
We begin 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 broke above resistance at 1.6990 and moved past the key psychological level of 1.70. This line has now reverted to an unfamiliar role as a support level.
1.6823 continues to provide strong support.
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 bullish on GBP/USD.
The pound has pushed above the key 1.70 line and could continue to push higher. UK numbers continue to look solid, and the BOE’s reluctant acknowledgement that an interest rate hike could be in the works in 2014 has boosted the currency. In the US, the Federal Reserve’s statement has weighed on the dollar, although the QE tapers continue and market sentiment towards the US dollar remains positive.
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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