GBP/USD was significantly hit by Bernanke’s move and tested an important support line. The upcoming week has a revised version of GDP among other events. Did Britain really exit the recession? Here’s an outlook for this week in the Pound, and an updated technical analysis for GBP/USD.
GBP/USD graph with support and resistance lines marked. Click to enlarge:
Mervyn King continues to play a strong role in the Pound’s trading. He continued his refusal to admit the rising inflation, and hurt the Pound. He’ll have his chance to move the markets this week as well. Let’s start the review:
- Inflation Report Hearings: Start on Tuesday at 9:15 GMT. Mervyn King, and possibly other members of the BOE, will come to parliament and talk about inflation as well as other matters. This lengthly session that discusses also growth and employment will probably contain a few headlines from Mr. King – headlines that will move the Pound.
- BBA Mortgage Approvals: Published on Tuesday at 9:30 GMT. The British Bankers’ Association represents roughly two thirds of Britain’s mortgages, thus supplying a significant indicator that precedes the government’s release. The number of mortgages is rising steadily and it reached 45.9K last time. Another tick up is predicted.
- Paul Tucker talks: Start speaking on Tuesday at 12:10 GMT. As Deputy governor of the BOE, Tucker is an influential member that already moved the market before. He’ll talk about the state of the economy in London.
- Adam Posen talks: Begins on Wednesday at 9:25 GMT. Although he’s an external member of the MPC, Posen also had his share of shaking the Pound. He’ll be speaking in another conference in London.
- Business Investment: Published on Thursday at 9:30 GMT. This is the preliminary release of this important quarterly indicator. It represents both public and private sectors. Investment is squeezing in Britain. In the previous quarter, it squeezed by “only” 3%, after huge drop of 7.6% and 10.2% beforehand.
- Mervyn King talks: Starts on Thursday at 9:30 GMT. This appearance in parliament is about the banking system rather than the economy, but King is the King – and he probably won’t miss a chance to shake the Pound once again.
- David Miles talks: Starts speaking on Thursday at 18:00 GMT. The last British speech for this week comes from a member that has different policy opinions. It will be interesting to follow his words after he realigned with his colleagues in the last rate decision.
- CBI Realized Sales: Published on Thursday at 11:00 GMT. 160 wholesalers and retails are surveyed for this important indicator. After four positive months of expectations for growing sales volume, a big disappointment was seen last month as the result was -8 points instead of 11 positive points that were expected.
- GfK Consumer Confidence: Published on Friday at midnight GMT. This barometer measures the consumers directly – 2000 of them. Consumers are pessimistic for quite some time according to this indicator that scores below zero for quite some time. After reaching -13 a few months ago, it fell back down to -17. A similar outcome is expected now.
- Nationwide HPI: Published on Friday at 9:30 GMT. According to the Nationwide Building Society, British house prices are rising in the past 9 months. This is probably one of the reasons for the rising inflation. This is the earliest housing sector report and it usually has a strong impact on the Pound. Last month saw a surprise – a rise of 1.2% in prices, an accelerated pace.
- Revised GDP: Published on Friday at 9:30 GMT. This is the key event of the week, kept for the end. According to the preliminary release for Q4, the British economy only barely got out of recession. The growth rate of 0.1% was also reported in the revised NIESR GDP estimate, and is expected to be confirmed at the revised version as well. In Q3, the contraction rate was revised in a positive manner so there’s hope. But a small downwards revision this time means that Britain is still in a very long recession.
GBP/USD Technical Analysis
The Pound got close to the 1.5833 resistance line, but that was short lived. It was supported at the 1.5530 line, but that was broken as well. After bouncing at the strong 1.5350 line, it manages to close above it. Most lines haven’t changed from last week’s outlook.
Close resistance is found at 1.5530, last week’s low. This proved as a clear line this week. Above, 1.5720 was a support line for quite some time, but is now a weak resistance line.
Above, 1.5833 is already an important resistance line that the Pound failed to breach. It also was a support line beforehand. Further above, 1.6110 is worth mentioning. Higher lines are just too high.
Looking down, 1.5230, which was a peak quite some time ago, proved to be a strong support line this week. Below this significant support line, the next number is a strong round number: 1.50.
Below the round number, 1.4780 is another support line, but it can be attacked only if Britain continues the recession.
I am bearish on GBP/USD.
The negative sentiment hasn’t changed. This week’s rise in unemployment was a setback to the Pound, and this was also felt in price action. The direction is down.
- 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 the Australian dollar, read the AUD/USD forecast.
- For USD/CAD, check out the Canadian dollar forecast.
Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.