Looking for the latest outlook, for the current week? Check out the section: GBP USD Forecast
The positive employment data helped the Pound against the Euro but not against the dollar. At lower ground, GBP/USD awaits final GDP results among other indicators. Here’s an outlook for the upcoming short Christmas week in Britain, and an updated technical analysis for GBP/USD, looking down.
GBP/USD chart with support and resistance lines marked on it. Click to enlarge:
Inflation picked up a little bit, while retails sales disappointed in a busy week in Britain. The big news was that Britain finally saw a dip in the number of unemployed people. This helped the Pound. Apart from final GDP, note the meeting minutes of the central bank – they might indicate the policy for 2010. Let’s start:
- Nationwide HPI: The exact release time is unknown at the moment. This report, by the Nationwide Building Society on housing prices is considered quite accurate and tends to move the Pound. It has shown higher prices in the past 7 months. The rises in the past two months have been moderate: 0.5% and 0.4%.
- Current Account: Published on Tuesday at 9:30 GMT. Britain traditionally suffers from a deficit in the Current Account, which includes services and money flows, in addition to goods that are reported in the trade balance release. Britain releases this figure every quarter, and this makes it rather “heavyweight”. In Q2, the deficit jumped from 4.1 to 11.4 billion, weighing on the Pound. It’s expected to ease to a 8.1 billion deficit this time.
- Final GDP: Published on Tuesday at 9:30 GMT. The British economy disappointed with an ongoing recession in Q3, while most of the world enjoyed new growth. The revised version showed a contraction of only 0.3%, contrary to the first release that showed a 0.4% drop. The final version is expected to be even better, but still negative – contraction of 0.1%. Could this number get close to the unofficial NIESR GDP that was positive?
- MPC Meeting Minutes: Published on Wednesday at 9:30 GMT. No surprises were seen in the last meeting. The interest rate and the Quantitative Easing programs remained unchanged. As we’ve seen in previous decisions, not all the decisions are made unanimously. If some members thought of expanding the QE program, this could weaken the Pound. Hints about rate hikes could help the Pound, but this is unlikely to happen.
- BBA Mortgage Approvals: Published on Wednesday at 9:30 GMT. The British Bankers Association, which covers two thirds of British mortgages, has shown an improved picture in the past months, but the last month saw a stall in growth, as the number of mortgages grew by only 100 houses. It’s expected to rise to 43,300 approvals.
GBP/USD Technical Analysis
GBP/USD managed to rise above 1.64 before tumbling down. 1.6260, which held strong last week, was broken. Also 1.6110, mentioned in last week’s outlook, was breached. GBP/USD reached 1.6052 before making a nice retrace on Friday to close at 1.6150.
1.6110 continues to be an important support line, as the pair managed to close above this point – this is a critical spot. If the pair stays above this line, it could move higher.
The first resistance line is at 1.6260, which was a support line just last week. Further above, 1.65 is another resistance line.
Looking down below 1.6110, I’ve added 1.60 as a minor support line. It serves as such a few months ago, and it’s also a round, psychological number.
Further below, 1.5720 continues to provide major support, last tested in October, before the comeback of the Pound began. Looking even lower, 1.5350 is the next support line, being a resistance line more than once at the beginning of the year.
I continue being bearish on GBP/USD.
While an improvement in the economy cannot be ignored, the heavy deficit and the strength of the dollar are stronger than the Pound.
Further reading:
- For a broad view of all the week’s major event in all currencies, read the forex weekly outlook.
- For the Euro, read the EUR USD Forecast.
- For GBP/USD, look into the British Pound forecast.
- For the Australian dollar, read the AUD/USD forecast.
- For USD/CAD, check out the Canadian dollar forecast.
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