The British pound was steady during the week, but took a tumble on Friday, as it dipped below the 1.50 line. The pair closed at 1.5162. This week’s major events includes the Official Bank Rate and PMI releases. Here is an outlook of the events and an updated technical analysis for GBP/USD.
The pound was steady during the week, but lost over a cent at the end of the week, as Manufacturing PMI hit a four-month low and fell below the 50 level for the first time this year.
Updates: Construction PMI was awful, dropping to 46.8 points. This was way below the estimate of 49.2 points. BRC Retail Sales Monitor, was up sharply, climbing to 2.7%. GBP Services PMI came in at 51.8 points, beating the estimate of 51.1 points. The pound continues to improve, as GBP/USD was trading at 1.5158. BRC Shop Price Index climbed 1.1%. Halifax HPI rose 0.5%, slightly higher than the forecast of 0.4%. BOE Governor Mervyn King testified before the Parliament Committee on banking standards. There were no surprises from the BOE, as the interest rate and asset purchase levels remained at their current levels. The interest rate continues to be pegged at 0.50%, while Asset Purchase Facility remained unchanged at 375 billion pounds. The pound is showing some fluctuations, as GBP/USD was trading at 1.5035.
GBP/USD graph with support and resistance lines on it. Click to enlarge: 
- Construction PMI: Monday, 9:30. Construction PMI has been stuck below the 50 level since November 2012, indicating sustained contraction in the UK construction sector. As well, the index has failed to meet the estimate since that the November reading. The estimate for the March release is slightly higher, at 49.2 points.
- BRC Retail Sales Monitor: Tuesday, 00:01. This indicator, which is based on data from stores belonging to the BRC, helps provides a snapshot of the retail sales industry. The indicator jumped 1.9% in February, its best reading in over a year. The markets will be hoping for another strong showing in the upcoming release.
- Halifax HPI: Tuesday, 5th-7th. This indicator measures the change in house prices in the UK, and as such is a leading housing indicator. The index declined 0.2% in February, and the markets are expecting a turnaround in the March release, with an estimate of a 04% gain.
- Services PMI: Tuesday, 9:30. Services PMI has been above the 50-point level for over a year, with the exception of the January 2013 release. This indicates that the UK service industry has been steady, with modest expansion. The previous reading came in at 51.5 points, and the March estimate stands at the same figure.
- BRC Shop Price Index: Wednesday, 00:01. This index measures the change in price of goods from stores belonging to the BRC, and provides analysts with useful data concerning consumer inflation in the UK. Prior to the February reading, the index posted gains of 1.5% for three consecutive months. The index showed a much smaller gain in February of 0.6%.
- BOE Governor Mervyn King Speaks: Wednesday, 9:45. Governor King will be testifying before a parliamentary committee about banking standards. A speech which is considered more hawkish than expected is bullish for the pound.
- Asset Purchase Facility: Thursday, 12:00. The BOE has been purchasing assets at the rate of 375 billion pounds a month since June 2012. No change is expected in the March announcement.
- Official Bank Rate: Thursday, 12:00. The BOE’s key interest rate has been set at 0.50% since 2009, and the markets are not expecting any change in the March announcement. The MPC will release a Rate Statement at the same time as the interest rate announcement.
- Consumer Inflation Expectations: Friday, Tentative. This indicator surveys consumers for their expectation of inflation over the next 12 months. This indicator, which is released quarterly, is useful for tracking actual inflation in the UK.
GBP/USD Technical Analysis
GBP/USD opened the week at 1.5095. The pair touched a high of 1.5222, but lost ground at the end of the week, dipping below the 1.50 line as it reached a low of 1.4985. The pair closed at 1.5037, as the support level of 1.5010 (discussed last week) remained intact at the end of the week.
Technical lines from top to bottom:
We begin with resistance at 1.5750. This line saw a lot of activity in the first half of February, before the pound began its recent slump. This is followed by resistance at 1.5648. We next encounter resistance at 1.5567. This line last saw activity in mid-February. Below, there is resistance at 1.5484.
Moving lower, we encounter resistance at 1.5406. Next, 1.5361 has reverted to a resistance role, after providing support since last June. The next line of resistance is at 1.5282. This is followed by 1.5189, which was briefly breached this week but remains in a resistance role. Next, there is weak resistance at 1.5061. This line could see further activity if the pair can muster any upward momentum.
GBP/USD is receiving support at 1.5010, which is protecting the psychologically significant level of 1.50. This line was breached on Friday, as the pair dipped below the 1.50 level for the first time since July 2010. Next, there is support at 1.4896, just below the round number of 1.49. We next encounter support at 1.4765, which has remained intact since June 2010. This is followed by support at 1.4665. The final support line for now is at 1.4540.
I remain bearish on GBP/USD.
The pound has a miserable 2013, and there isn’t much good news on the horizon. The UK economy continues to sputter, and the US continues to produce mixed results, as the road to recovery remains a bumpy one. The pound dipped into 1.49 territory level late last week, as the all-important 1.50 level is under pressure from the pair.
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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