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The Pound lost over 200 pips this week, suffering from a strong dollar and a problematic budget from Alistair Darling. The upcoming week contains inflation, retail sales employment figures and more. Here’s an outlook for a busy week for British Pound traders, and an updated technical analysis for GBP/USD.
GBP/USD chart with support and resistance lines marked on it. Click to enlarge:
One thing the Pound didn’t enjoy was the unofficial NIESR GDP estimate, that showed a cautious return to growth in November. The upcoming week contains 12 events. Many of them cannot be overlooked. Let’s review them. The technical analysis will follow:
- Rightmove HPI: While this is not the most accurate house price data, it comes very early in the month, and very early in the trading week – on Monday at midnight GMT. This indicator disappointed with a fall of 1.6% month, after two months of growth. It’s now expected to rise modestly, under 1%. An acceleration in house prices is necessary for an acceleration in consumer prices as well.
- RICS House Price Balance: This indicator shows the relative part of surveyors reporting a rise in prices. In the past three months, the people reporting a rise in prices were winning. Last month’s 34% is predicted to be followed by 39% this time. Published on Tuesday at midnight GMT.
- CPI: The slowdown in prices seems to have reached the bottom in Britain, as CPI rose last month to an annual rate of 1.5%, after dropping for quite some time. Consumer prices are expected to rise to 1.8%, still in the government’s target inflation range. Core CPI is expected to remain stable at a 1.8% annual growth rate. Published on Tuesday at 9:30 GMT.
- RPI: Published together with the CPI, the Retail Price Index is of high importance, as it is sometimes considered more accurate. According to the RPI, prices have fallen in the past 8 months. This time, prices are expected to rise by 0.2%. Such an outcome will boost the Pound. Published on Tuesday at 9:30 GMT.
- David Miles talks: After the recent rate decision left the interest rate and the QE program both unchanged (contrary to the previous surprise), a Miles, a senior MPC member, will make a public appearance. He’ll start talking on Tuesday at 8:30 GMT, and may shake the Pound.
- Claimant Count Change: This important employment indicator is published on Wednesday at 9:30 GMT. This figure relates to November, that ended recently – what makes this figure fresh and important. Last month’s number of people asking for unemployment benefits rose by 12.9K, much less than previous months and early expectations. This improvement is now expected to be slightly erased, with a rise of 14.2K jobs this time. Published on Wednesday at 9:30 GMT.
- Unemployment Rate: This employment figure relates to October, but is still very important – it’s highly quoted by the media and impacts policymakers, especially as Britain is entering an election year. Also this month, Britain’s unemployment rate is expected to rise to 8%, but last month’s same predictions were beaten – the rate fell to 7.8%. Published with the Claimant Count Change, on Wednesday at 9:30 GMT.
- Retail Sales: British consumers have been upping their spending recently, with a 0.4% rise that followed to unchanged months. More growth is expected to be seen this time – by 0.5%. Note that this figure didn’t fall for 5 months, during the time that the economy shrank. Published on Thursday at 9:30 GMT.
- Consumer Inflation Expectations: This additional inflation figure is also published on Thursday at 9:30 GMT, and will be somewhat overshadowed by retail sales. This quarterly figure has reached a bottom in Q1, with expectations of a 2.1% rise in prices. In the past two quarters, it has risen to 2.4%. The upcoming release should show higher expectations, as prices have risen. Note that expectations are always higher than official releases.
- CBI Realized Sales: The Confederation of British Industry published showed a higher sale volume in the past 3 months, with the score reaching 13 points last month. Another rise is expected this time, up to 16 points. This survey touches the wholesalers, which move more slowly, so these numbers have a long term meaning. Published on Thursday at 11:00 GMT.
- BOE Financial Stability Report: This report by the BOE has been delayed for a long time, and is finally due on Friday at midnight GMT. With other European countries suffering from fragile economic conditions, British stability, especially in the financial sector is important for Britain and for other countries as well. The Bank of England publishes this report twice a year.
- Public Sector Net Borrowing: The British government’s expenditure has come under scrutiny. The high deficit won’t be addressed in an election year, a we’ve seen from Alistair Darling in last week’s pre budget release. So, the British government is expected to borrow 23,1 billion pounds this time, double last month’s 11.4 billion, which was also more than expected. This weighs on the Pound.
GBP/USD Technical Analysis
The Pound fell at the beginning of the week and continued afterwards below the 1.6260 support line down to 1.6160. It finally closed at 1.6260 and is now in crossroads.
I haven’t made changes to last week’s support and resistance lines, but they will probably be updated next week, as the Pound is falling.
Looking down, 1.6110 serves as an initial and significant support line. It served as a resistance line before the pair made a break upwards. Further down, 1.5720 supplies huge support. The Pound bounced off this line when it began the big comeback.
Looking up, 1.65 serves as a minor support line. Further up, 1.6876 was a peak in recent weeks, and 1.7042 is the year-to-date high.
I am a big bear on GBP/USD.
While the unofficial GDP suggests hope, and also employment should show more improvement, Britain is suffering from a heavy deficit, and cannot withstand the greenback’s strength.
- 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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