GBP/USD Outlook April 8-12



The British pound bounced back against the US dollar this week as the pair was up over one cent on the week. GBP/USD pushed above the 1.53 line, and closed at 1.5335. This week’s highlight is Manufacturing Production. Here is an outlook of the events and an updated technical analysis for GBP/USD.

The interest rate and asset purchase levels announced by the BOE turned out to non-events, as the BOE made no changes. The pound took advantage of awful US Non-Farm Payrolls and posted gains late in the week.

Updates: BRC Retail Sales Monitor gained 1.9%. RICS House Price Balance dropped 1%, better than the forecast of a 5% loss. Manufacturing Production looked sharp, gaining 0.8%. The estimate stood at 0.4%. The British trade deficit came in at 9.4 billion pounds, higher than the estimate of 8.7 billion pounds. Industrial Production rebounded nicely, posting a gain of 1.0%. This beat the estimate of 0.4%. The yield on the British 10-year bond was 1.73%. NIESR GDP will be released later on Tuesday. The pound has improved on the manufacturing release, as GBP/USD has climbed to 1.5309.

GBP/USD graph with support and resistance lines on it. Click to enlarge:  GBP USD Forecast Apr 8-12

 

  1. BRC Retail Sales Monitor: Monday, 23:01. This consumer spending indicator is limited to retailers belonging the BRC (British Retail Consortium). The indicator has risen nicely in 2013, from 0.3% in the January release, to 2.7% in March. Will the upward trend continue in the April release?
  2. RICS House Price Balance: Monday, 23:01. The housing inflation indicator has looked sluggish, and has not posted any gains so far in 2013. The previous release showed a decline of 6%. The estimate for the April reading is calling for another drop of 4%.
  3. Manufacturing Production: Tuesday, 8:30. This is the major release of the week. The index has not looked good in recent releases, with three declines in the past four releases. After a decline of 1.5% in March, the markets are expecting a turnaround, with the April forecast calling for a gain of 0.4%.
  4. Trade Balance: Tuesday, 8:30. The British Trade Balance Deficit has been steadily narrowing, from 9.5 billion pounds in December to 8.2 billion in March. However, the markets are expecting the deficit to widen in the April reading, with an estimate of 8.5 billion pounds. Will the indicator surprise the markets and beat the estimate?
  5. 10-year Bond Auction: Tuesday, Tentative. The yield on 10-year bonds has been slowly rising, and climbed above 2% in the previous release for the first time in a year. Will the upward trend continue in the upcoming release?
  6. NIESR GDP Estimate: Tuesday, 14:00. Analysts use this indicator, which is released monthly, in order to predict actual GDP, which is released each quarter. The indicator has not shown much activity of late, and posted a decline of 0.1% in the March reading. The markets will be looking for the indicator to push into positive territory in the upcoming release.
  7. BOE Deputy Governor Paul Tucker Speaks: Thursday, 13:00. Deputy Governor Tucker will be speaking at seminar in Dublin. A speech which is more hawkish than expected is bullish for the pound.
  8. CB Leading Index: Friday, 9:00. This third-tier index is composed of seven economic indicators, including production and consumer confidence. The March reading posted a gain of 0.4%, the index’s best showing since May 2012. The markets will be hoping for a similar reading in the April release.

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5195. The pair dropped to a low of 1.5033, as the support line of 1.5010 (discussed last week) held firm. The pair then rebounded sharply, touching a high of 1.5363. GBP/USD closed the week at 1.5335.

Technical lines from top to bottom:

We start with resistance at  1.5827. This is followed by 1.5750. This resistance line saw a lot of activity in the first half of February, before the pound began a dive which lasted until mid-March. This is followed by resistance at 1.5648. Below, there is resistance at 1.5567. This line has remained in place since mid-February. This is followed by resistance at 1.5484. Next, there is resistance at 1.5406. This line remained firm as the pound showed some strength late in the week.

GBP/USD is receiving support at 1.5258. Next is a support level at 1.5189. This line was briefly breached two weeks ago, but has strengthened as the pair trades at higher levels. Next, there is support at 1.5061. This is followed by 1.5010, protecting the all important 1.50 level. We next encounter support at 1.4896, just below the round number of 1.49. Below is 1.4765, which has remained intact since June 2010. The finals support level for now is at 1.4665.

I remain bearish on GBP/USD.

Despite some gains late last week, the UK economy continues to weigh on the pound. Construction and Services PMIs continue to point to contraction, although Services PMI posted a solid reading. The US had another disappointing week, which gave the pound some breathing room. If British Manufacturing Production does not meet market expectations, we could see the pound take a hit, as it did early last week following a disappointing Manufacturing PMI reading.

Further reading:




About

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.

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