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GBP/USD Forecast a technical analysis ► review of the major events that  move the British Pound (Sterling), and especially pound/dollar (cable) during the week. Here is some general information. Scroll down for the latest GBP/USD outlook

Pound/dollar characteristics

GBP/USD is one of the most traded currency pairs in the world and certainly one of the oldest. The nickname “cable” originates from the fact that the exchange rate was transmitted over the telegraph cable between Great Britain and the USA.

High volatility characterizes sterling/greenback trading. In comparison to some of its peers, stop-loss orders are usually placed at wider margins.

Another characteristic of British pound trading is that the pair “front-runs” economic releases from the UK. We often see a strong market movement ahead of publication. Rumors, leaks or sheer nervousness move GBP USD

The pound is a “risk” currency. When the global mood is positive, GBP tends to gain against the USD, albeit usually not at the same magnitude as commodity currencies. When doom and gloom return to markets, the pound is on the retreat.

Brexit and GBP/USD

The biggest market mover of GBP/USD is the surprising decision of voters in the United Kingdom to leave the European Union. This unprecedented move shook up not only UK politics (the resignations of David Cameron, Nigel Farage, and Jeremy Corbyn’s struggles) but also Her Majesty’s currency. Brexit has sent Pound/USD to levels last seen in 1985. Post-Brexit GBPUSD forecasts vary by timeframe.

The pound dropped once again after PM Theresa May talked about a “Hard Brexit”. Markets want more access to the single market, but the government prefers more border control.

Contradicting forces are tearing the pound apart. The economic data came out better than expected (retail sales, inflation and even PMIs rebounded). On the other hand, talk of a “Hard Brexit“, aka, abandoning the single market, certainly weigh on sterling.

The triggering of Article 50 on March 29th is testing the extreme short positioning against the pound.

Latest weekly GBP/USD forecast:

GBP/USD enjoyed its strongest weekly gain in 2017, gaining 270 points. The pair closed the week at the 1.28 level. This week’s key event is Preliminary GDPHere is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.  

The pound jumped sharply as Prime Minister May shocked the markets by calling a snap election to be held June 8. May is expected to increase the Conservatives’ majority in parliament. In the US, construction figures were mixed and manufacturing and employment numbers missed their estimates.

Updates:

GBP/USD graph with support and resistance lines on it. Click to enlarge:

  1. Rightmove HPI: Sunday, 23:01: This indicator gives a snapshot of the level of activity in the housing sector. The index dropped to 1.3% in March, compared to 2.0% a month earlier.
  2. CBI Industrial Order Expectations: Monday, 10:00. The indicator has been pointing to stronger order volume, posting two straight readings of +8 points. The forecast for April stands at +9 points.
  3. Public Sector Net Borrowing: Tuesday, 8:30. The UK is expected to post a deficit of GBP 2.6 billion in March, up from GBP 1.1 billion in the February report. A larger deficit than expected could hurt the pound.
  4. CBI Realized Sales: Thursday, 10:00. The indicator has pointed to increasing sales volume, with two straight readings of +9 points. The estimate for March stands at +6 points.
  5. GfK Consumer Confidence: Thursday, 23:01. Analysts closely monitor consumer confidence, which is linked to consumer spending, a key component of economic growth. The UK consumer continues to show pessimism and came in at -6 points in March.
  6. Nationwide HPI: Friday, 28th-5th. This housing inflation indicator declined 0.3% in March, marking its first decline in almost two years. The index is expected to post a small gain of 0.1% in April.
  7. Preliminary GDP: Friday, 8:30. GDP reports are among the most important indicators and should be considered market-movers. Final GDP for Q4 came in at 0.7%, matching the forecast. The estimate for Preliminary GDP stands at 0.4%.

*All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.2535 and dropped to a low of 1.2512, testing support at 1.2548 (discussed last week). The pair then reversed directions and soared to 1.2905. GBP/USD closed the week at 1.2803.

Technical lines from top to bottom

With GBP/USD posting strong gains last week, we start at higher levels:

1.3247 is providing resistance.

1.3112 marked a low point in June 2016 as the pound crashed after the Brexit vote.

1.3020 is next.

1.2902 remains an immediate resistance line.

GBP/USD broke through resistance at 1.2775 for the first time since December 2016.

1.2548 is the next support line.

1.2345 was a low point in February.

I am bullish on GBP/USD.

With the US economy hitting some turbulence in consumer data, a June rate hike is by no mean a done deal. Trump’s first 100 days in office have disappointed the markets and weighed on the US dollar.

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Further reading:

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