A more quiet week in terms of indicators expects the Pound, but Mervyn King’s public appearance could rock the currency. Here’s an outlook for the 4 events that will move the currency, and an updated technical analysis for GBP/USD.

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

A rate hike in Britain didn’t seem so close – Andrew Sentance remained the only member voting for a rate hike. But the superb GDP changed the whole picture for the the Pound. Will it break the resistance line? Let’s start:

1. CBI Realized Sales: Published on Tuesday at 10:00 GMT. This indicator from the Confederation of British Industry showed lower sales volume in the past two months, but at least the negative number was better than expected last month – minus 5. A positive number could be seen this time, meaning higher sales volume among the 160 wholesalers and retailers surveyed for this index.
2. Mervyn King talks: Begins testifying in parliament on Wednesday at 10:45 GMT. The head of the BoE, together with his associates David Miles, Charles Bean, Paul Fisher, and the member that wants a rate hike – Andrew Sentance, will appear in front of the Treasury Select Committee and will lay out the current situation in Britain. With an improvement in jobs, GDP that jumps and rising inflation ,we can expect to hear big hints about a rate hike.
3. Nationwide HPI: Published on Wednesday at 6:00 GMT. This important housing sector figure showed a drop in prices 5 months ago, but since then, prices are still rising, at least according to this survey. But last month’s small rise of 0.1% creates expectations for a drop this time – a  0.4% drop that will hurt the Pound.
4. Net Lending to Individuals: Published on Thursday at 8:30 GMT. LAst month’s release for the BoE was great – lending rose to 1.5 billion, the highest level in 4 months, and far beyond expectations. More lending means more economic activity. Net lending is expected to slide down this time to 1.3 billion.
5. GfK Consumer Confidence: Published on Thursday at 23:00 GMT. This survey, which targets 2000 consumers, hasn’t been so good recently. It has been negative, meaning pessimism, since the financial crisis broke out, and also fell from -14 to -19 in recent months, showing a deteriorating sentiment amongst British consumers. It’s expected to remain unchanged this time.

The Pound failed to break the 1.5350 pivotal line twice at the beginning of the week, falling down to support at 1.5130 and trading in this range, ignoring the weak 1.5230 line. On Friday, it broke past 1.5350 and made and peaked at 1.5450, just short of the 1.5472 peak achieved in the previous week.

GBP/USD now ranges higher – between 1.5350 and 1.5470, a new line that was added on last week’s outlook. Above, 1.5520 is a very strong line of resistance that wasn’t breached since February, and was tested several times since then.

Above, 1.57 was a strong support line in 2009, and now provides minor resistance. Above, 1.5833 is already a very strong line, holding the Pound before the fall, and resisting an attempt of recovery at the beginning of the year. Higher, 1.6070 is the next line of resistance, but it’s quite far now.

Looking down below 1.5350, minor support is found at 1.5230, followed by the strong 1.5130 line, which held the pair in past week.

Below, 1.5050 played a role at the beginning of the month, and provides further support. Even lower, 1.4870 is a minor support line, followed by the strong 1.4780 line which held the pair in March and April. There are many more lines below, and they all lead to the year-to-date low of 1.4227.

I turn bullish on GBP/USD.

The whopping GDP jump, backed by rising inflation and an improving job market provide hope that Britain is really recovering, with a rate hike in sight. 1.5520 is a big test.

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/Dollar Forecast.
• For the Australian dollar (Aussie), check out the AUD/USD forecast.
• For the New Zealand dollar (kiwi), read the NZD/USD forecast.
• For USD/CAD (loonie), check out the Canadian dollar forecast.

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