GBP/USD Forecast Sep. 14-18

GBP/USD  posted strong weekly gains for the first time in a month, gaining over 200 points last week. The pair closed the week at 1.5425.  This week’s highlights  are Core CPI and Claimant Count Change. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.

In the UK, there were  no surprises from the BOE, which maintained interest rate and QE levels. Market sentiment was positive, though, and the pound posted gains following the BOE announcements. Manufacturing Production disappointed with a decline of 0.8%, well short of expectations. In the US, we had some good  employment news from JOLTS  Job Openings,  but the week ended on a disappointing note as consumer confidence  missed expectations.  All eyes are now focused on the big event: the all important Fed meeting coming up late  this the week.

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

1. CPI:  Tuesday, 8:30. CPI is the primary gauge of consumer inflation, and an unexpected reading can have a substantial impact on the movement of GDP/USD. Inflation has been practically non-existent for most of 2015, and the July reading came in at 0.1%. The forecast for the August report stands at 0.0%.
2. PPI Input:  This indicator measures the change in manufacturing inflation. The index is mired in a slump, having posted three consecutive declines. The July reading came in at -0.9%, better than the estimate of -1.8%. The markets are braced for another poor reading in August, with an estimate of -2.2%.
3. RPI:  Tuesday, 8:30. RPI is similar to CPI, but  includes housing costs which are excluded from CPI. The index has been one of the bright spots in the UK inflation picture,   with three consecutive readings of 1.0%. Little change is expected in the  August report, with a forecast of 0.9%.
4. CB Leading  Index:  Tuesday, 13:30.  This minor indicator is  based on 7 economic  indicators. The index  has stumbled, posted two straight declines, with a -0.2% reading in June.
5. Average  Earning Index:  Wednesday, 8:30. This key  event is a leading indicator of consumer inflation. The indicator posted a gain of 2.4% in June, softer than the 3.2% gain recorded a month earlier. The estimate for the July report stands at 2.5%.
6. Claimant Count Change:  Wednesday, 8:30. Claimant Count is the most important employment indicator, and can have a strong impact on the movement of GBP/USD. The indicator has posted declines in three of the past four readings, pointing to lower unemployment levels in the UK. Another drop is expected in the August report, with a forecast of 5.1 thousand. The unemployment rate is  expected to hold steady at 5.6% in the August release.
7. 10-year Bond Auction:  Wednesday, Tentative. The average yield on 10-year bonds remains close to the 2.0 level, as the yield from the August auction was 1.98%. No significant change is expected in the upcoming release.
8. Retail Sales:  Thursday, 8:30. Retail Sales is the principal gauge of consumer spending, a key driver of economic activity. The indicator continues to struggle, mustering a weak gain of just 0.1% in July, short of the estimate of 0.4%. Little change is expected in the August release, with an estimate of 0.2%.
9. BOE Quarterly Bulletin:  Thursday, 23:05. This BOE report provides  market  analysis and commentary, and is a minor event as some of report as already been released.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5195 and  quickly touched a  low of 1.5162. It was  mostly uphill  from there, as the pair flexed some muscle and pushed to high of 1.5476, as resistance held firm at 1.5485 (discussed last week).  The pair closed the week at 1.5425.

Live chart of GBP/USD: [do action=”tradingviews” pair=”GBPUSD” interval=”60″/]

Technical lines from top to bottom

With GBP/USD posting sharp gains  last week, we begin  at higher levels:

1.5825 was an important cap in November 2014.

1.5769 is the next resistance line.

1.5682 was a key resistance line  in December 2014 and January 2015.

1.5590  is the next line of  resistance.

1.5485  remained  intact  as the pound posted strong gains. It is currently a weak resistance line and could face pressure early in the week.

1.5341  continues to be  busy, and has switched to a support role.

1.5269 is next. It  was an important support level in March.

1.5163 has some breathing room as a support level.

1.5026 has provided support since April and is the final support line for now. It is protecting the symbolic line of 1.50.

I am  neutral on GBP/USD.

After a disappointing few weeks, the pound reversed directions and posted  a strong rally  against the greenback.  Will the Fed press the rate trigger this week?  Even if the Fed  plays it  safe and doesn’t make a move, hawkish talk from Yellen could  bolster the  greenback against the pound.

In our latest podcast, we  prepare you for the Fed decision from all directions

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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 kiwi, see the NZD/USD forecast.
• For the Australian dollar (Aussie), check out the AUD to USD forecast.
• For the Canadian dollar  (loonie), check out the USD to CAD  forecast.