The emergency budget that the new government will bring to parliament is the main event for the upcoming week. Here’s an outlook for the British events and an updated technical analysis for GBP/USD.
GBP/USD chart with resistance and support lines on it. Click to enlarge:
The past week saw positive news from Britain: unemployment made a nice drop and retail sales jumped. Inflation didn’t exceed expectations but remained high, keeping up the pressure for a rate hike. We’ll get a look at the thoughts of the central bankers in the upcoming week. Let’s start:
- Rightmove HPI: Published on Sunday at 23:00 GMT. This isn’t the most accurate house price index in Britain, yet it’s the first one to be released. According to Rightmove, prices have risen in the past 5 months, with a modest rise of 0.7% last month. A similar rise is predicted this time.
- Emergency Budget Release: Published on Tuesday at 11:30 GMT. David Cameron’s new government has vowed to take care of the deficit. One of the key steps is presenting a fresh and smaller emergency budget for 2010. George Osborne, the new Chancellor of the Exchequer, will present it parliament. Forecasts about the economy will rock the Pound.
- MPC Meeting Minutes: Published on Wednesday at 8:30 GMT. In his last decision, Mervyn King made no change – he left the interest rate at the historic low of 0.5% and continued dismissing the rising inflation. We’ll now get to hear if any of the 9 member voted to raise the rate. Any outcome which isn’t unanimous will boost the Pound.
- BBA Mortgage Approvals: Published on Wednesday at 8:30 GMT. The British Bankers’ Association represents data for about two thirds of UK Mortgages. After peaking at 45K at the end of the year, this indicator fell to 35,700 last month. A small rise is expected this time.
- CBI Realized Sales: Published on Wednesday at 10:00 GMT. 160 retailers are surveyed for this indicator. A big disappointment was seen last months, as the index fell from a positive number to a negative one, indicating a lower sales volume. The score of -18 that hurt the Pound last time will probably be repeated.
GBP/USD Technical Analysis
After bouncing above 1.45, GBP/USD easily jumped above the minor resistance line of 1.4610 and began a struggle with the critical 1.4780. It finally managed to settle above this line, that turned into a support line and closed at 1.4821.
The Pound is now bound between 1.4780 and 1.5050, and has lots of room to rise. I’ve added some higher lines on last week’s outlook. Above 1.5050, the next line is 1.5130, that worked as strong support in April, and it when it failed, the Pound collapsed.
Above, 1.5350 was a pivotal line when the Pound was trading higher and will be a point of struggle if the pair approaches these levels. Strong support is seen at 1.5530, the highest level seen in many months.
Looking down below 1.4780, minor support is found at 1.4610, which worked as a resistance line recently. Below, 1.45 provides stronger support, as it supported the Pound last week. Below, 1.44 was a support line last year and is the next line of support now.
The year-to-date low of 1.4227 is a strong line of support, and it’s followed by a minor line at 1.4130.
I remain neutral on GBP/USD.
The break above 1.4780 and the continuing situation of relatively high inflation are sterling bullish, yet the expected emergency cuts in the budget could send the pair much lower. This is a critical event for the Pound.
- For a broad view of all the week’s major events worldwide, read the forex weekly 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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