Looking for the latest outlook, for the current week? Check out the section: GBP/USD Forecast
The greenback’s strength hit hard on the British Pound last week. The Pound faces the second version of the Q3 GDP which isn’t expected to change dramatically, among other events. Here’s an outlook for the upcoming week in Britain and an updated technical analysis for GBP/USD.
GBP/USD chart with support and resistance lines marked on it. Click to enlarge:
Britain isn’t suffering from deflation, like Europe. Last week’s CPI was OK, but didn’t help the Pound. In the same context, this week’s long inflation hearings in parliament will also shake the Pound. Let’s review the events. The technical analysis will follow:
- Nationwide HPI: The Nationwide Building Society will probably publish this figure during the week, but the exact time is unknown at the moment. House prices have been on the rise in the past 6 months, according to Nationwide. A further rise of 0.4% is expected to follow last month’s rise of the same scale.
- BBA Mortgage Approvals: The British Bankers’ Association rounds up data from about two thirds of the total British mortgage market, making this release important. In recent months, approvals have risen, reaching 42.1K last month, the highest in 18 months. This month, they’re expected to rise even higher, to 43.7K, showing that Britain’s housing sector is recovering after being badly hurt in the crisis. Published on Tuesday at 9:30 GMT.
- Prelim Business Investment: This is the preliminary release for an important quarterly figure. Business investment was hit badly by the crisis, and foresaw it. The last time that a rise was seen in this index was Q2 of 2007. Last quarter’s dive was quite depressing: 10.4%! This time, the drop is expected to be better: “only” 3.5%. Published on Tuesday at 9:30 GMT, somewhat overshadowing the mortgage indicator.
- Inflation Report Hearings: Mervyn King and his associates go to parliament and talk about the inflation situation, and about the economy in general. In his last appearance in parliament, King sent the Pound way down. The hearings begin on Tuesday at 9:45 GMT at the Treasury Committee.
- Mervin King and Paul Tucker talk: Senior BoE members will stay in parliament in order to testify in front of another committee – the Economic Affairs Committee at the house of lords. There, they will both be testifying once again and might move the Pound, maybe in another direction. They begin talking on Tuesday at 15:35 GMT. They might hint about the quantitative easing scheme, which was expanded modestly last time.
- Revised GDP: Britain’s third quarter GDP was terrible: according to the initial release, Britain is still in recession, and the economy shrank by 0.4%. Now, economists are expecting that the revised figure will be better – a 0.3% contraction – still a shrinking economy in recession. No matter the result, the Pound will shake at the time of publication – Wednesday at 9:30 GMT.
- CBI Realized Sales: 160 wholesale and retail companies are surveyed for this indicator. In the past two months, this figure has been positive, showing that there is a higher sales volume. The number is predicted to rise from 8 to 11. This is also a very important release for the Pound, on Thursday at 11:00 GMT.
GBP/USD Technical Analysis
The Pound had a nice beginning to the week, reaching 1.6886, but then began tumbling down, hardly managing to close above 1.65, with most of the fall on Friday.
1.65 is the first support line of a falling Pound, although it’s quite minor. Further down, 1.6260 served as support in recent weeks. Below that 1.6110 was a resistance line when the Pound was trading low. This is already a strong support line.
Last support is found at 1.5720, a line that was solid, and where the Pound began the big comeback. Note that some of the support and resistance lines have changed since last week’s GBP/USD outlook.
Looking up, 1.6876, the past week’s high, is the first resistance line. The next place of resistance is the year-to-date high at 1.7040.
Still Pounding the Pound
The British Pound took a beating on the renewed dollar strength. The British economy continues to suffer from many problems. I believe that the third quarter recession will be confirmed this week.
My sentiment remains bearish on the Pound.
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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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