The British pound made upwards in the past week. Will this continue? The first release of GDP for Q2 will draw a lot of attention in the upcoming week. Here is an outlook for the upcoming events, and an updated technical analysis for GBP/USD.
The pound enjoyed the relief rally after the positive result of the European summit. But also a rise in local retail sales helped cable move higher. A wider indicator of the economy is awaiting us now.
GBP/USD daily chart with support and resistance lines on it. Click to enlarge:
- BBA Mortgage Approvals: Monday, 8:30. The British Bankers’ Association represents around two thirds of UK mortgages, making this release a good gauge for the official numbers. After dipping under 30K, the number of approvals made it back up, with 30.5K last month. A similar number is likely now. The housing sector is in a standstill.
- GDP: Tuesday, 8:30. The growth rate of 0.5% in Q1 just barely erased the contraction of the same scale recorded in Q4 2010. There are deep worries about the situation in Britain. The first release for Q2 is likely to show that growth continues, but at a weaker pace, justifying an unchanged interest rate. Expectations are for a growth rate of only 0.2%.
- CBI Industrial Order Expectations: Wednesday, 10:00. Similar to the housing sector, also the manufacturing sector is close to a standstill. Last month, the score was +1, after -2 beforehand – hardly any change. Another positive number, reflecting growth, is likely now. But this will remain weak.
- CBI Realized Sales: Thursday, 10:00. After a year of positive numbers, reflecting a growing volume of sales, retailers and wholesalers sent this indicator into negative territory, at -2. This reflects lower volume. A similar number, close to 0, is expected now.
- GfK Consumer Confidence: Thursday, 23:00. This survey of 2000 consumer has been ranging between -21 and -31 in recent months, showing that consumers are quite pessimistic. A small improvement is expected now, with the score edging up from -25 recorded last month.
- Nationwide HPI: Friday, 6:00. The Nationwide Building Society provides a highly regarded house price index in the UK. Last month, they have shown no change in prices. This follows small changes beforehand. Will we see a drop now?
- Net Lending to Individuals: Friday, 8:30. More lending means more economic activity. Net borrowing is expanding, at a steady pace, above 1 billion. A small drop from last month’s 1.3 billion is likely now.
* All times are GMT.
GBP/USD Technical Analysis
At the beginning of the week, Pound/dollar managed to hold above the round number of 1.60 (mentioned last week). It later turned into a rally, with the area of 1.6280 – 1.63 providing fierce resistance.
Technical levels, from top to bottom:
We start from a point that is still afar: 1.6550 was a peak at the end of May and is a distant resistance line. .6460 is a tough line of resistance, that capped the pair three times in June. If 1.63 is convincingly conquered, this is the next level.
The veteran 1.6280 to 1.63 isn’t too far off, proved to be a very strong line. It was a peak several times in recent months and worked better as support. A temporary rise above this line now was short lived. 1.62 was a very distinctive line just now. It capped GBP/USD, but after the break, it immediately turned into support.
Further below, 1.6110 is another veteran line. It quickly turned into support before the next move higher. Below, the round number of 1.60 was the base of the leap.
1.5940, which was a previous swing low, returns to play a role now, but a minor one. 1.5910, which was a peak many months ago, worked perfectly as support after the pair climbed back up. It is an important line now.
1.5820 is only a minor line. It delayed the comeback. The fresh low of 1.5780 is the next support line, which will be tested on the next fall.
The downtrend resistance that was mentioned last week is clearly broken now. This can help the pair.
I remain bearish on GBP/USD.
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 the New Zealanddollar (kiwi), read the NZD forecast.
- For the Swiss Franc, see the USD/CHF forecast.
- USD/CAD (loonie), check out the Canadian dollar.
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