GBP/USD posted gains for a third straight week, closing at 1.4454. This week’s highlight is CPI. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.
The Federal Reserve issued a very dovish policy statement and lowered its projections of rate hikes in 2016, weakening the US dollar. The pound also received a boost from UK Claimant Change, which sparkled with a sharp drop of 18.0 thousand, much lower than expectations.
[do action=”autoupdate” tag=”GBPUSDUpdate”/]GBP/USD graph with support and resistance lines on it. Click to enlarge:
- Rightmove HPI: Monday, 00:01. This housing inflation indicator provides a snapshot of the level of activity in the UK housing sector. The index was unexpectedly strong in February, posting a gain of 2.9%. This marked its strongest reading in 8 months.
- CBI Industrial Order Expectations: Monday, 11:00. The index continues to post sharp declines, pointing to deep pessimism amongst manufacturers. The indicator came in at -17 points in February, well short of the forecast of -11 points. The markets are braced for another sharp decline, with the estimate standing at -13 points.
- CPI: Tuesday, 9:30. CPI is the primary gauge of consumer inflation and should be treated as a market-mover. The index has been creeping higher in recent readings, and edged up to 0.3% in January, matching the forecast. The upward swing is expected to continue in February, with an estimate of 0.4%.
- PPI Input: Tuesday, 9:30. This manufacturing inflation index has looked dismal, posting three straight declines. The markets are expecting better news in February, with an estimate of 0.4%.
- Public Sector Net Borrowing: Tuesday, 9:30. The indicator posted a surplus in January of GBP 11.8 billion, its first surplus in six months. The markets are anticipating a return back to a deficit in February, with a forecast of GBP 5.4 billion.
- RPI: Tuesday, 9:30. RPI includes housing costs, which are excluded from CPI. The index has been rising since the end of 2015, and the January reading improved to 1.3%, within expectations. Another gain of 1.3% is the estimate for the February report.
- Retail Sales: Thursday, 9:30. Retail Sales is a key gauge of consumer spending and an unexpected reading can have a sharp impact on the direction of GBP/USD. The indicator rebounded in January with a sharp gain of 2.3%, well above the estimate of 0.8%.
- CBI Realized Sales: Thursday, 11:00. This indicator softened significantly in February, posting a gain of 10 points. This was well short of the estimate of 16 points. Will we see a rebound in the March report?
* All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.4378. The pair dropped to low of 1.4051 and then reversed ground, climbing to a high of 1.4514, as resistance held firm at 1.4562 (discussed last week). GBP/USD pair closed the week at 1.4455.
Live chart of GBP/USD: [do action=”tradingviews” pair=”GBPUSD” interval=”60″/]
Technical lines from top to bottom
We begin with resistance at 1.4815. This line was last tested in January.
1.4725 is next.
1.4635 has been a resistance line since early February.
1.4562 held firm in resistance last week.
1.4346 is an immediate support level.
1.4227 is next.
1.4148 was a cushion in late January.
The round number of 1.40 is the final support line for now. It was last breached in March 2009.
I am bearish on GBP/USD.
The pound has impressed in March, raising the possibility of a correction this week due to profit taking. US fundamentals remain stronger than the UK, and although the Fed did not make a move in March, the bias remains towards tightening. This monetary divergence favors the US dollar.
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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 kiwi, see the NZD/USD forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the Canadian dollar (loonie), check out the USD to CAD forecast.