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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.

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 and the following announcement of a snap election sent the pound higher, but the economy is showing worrying signs. Brexit bites.

Latest weekly GBP/USD forecast:

GBP/USD dropped 150 points last week. The pair closed at 1.2965. This week’s highlight is Preliminary GDP. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.  

The pound dropped sharply after British CPI slowed down to 2.6%, short of the estimate of 2.9%. In the US, political risk continues to rise, as Trump’s failure to pass a healthcare bill triggered a fresh wave of US dollar selling. The revelation that Special Counsel Mueller is expanding his investigation into Trump’s business dealings also contributed to the greenback’s losses.

Updates:

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

  1. CBI Industrial Order Expectations: Tuesday, 10:00. The manufacturing sector has been improving, as the indicator surged to 16 in June, crushing the estimate of 7 points. The estimate for July stands at 12 points.
  2. MPC Member Andy Haldane Speaks: Tuesday, 17:00. Haldane will deliver a lecture at the Finance Foundation in London. Remarks which are more hawkish than expected is bullish for the British pound.
  3. Nationwide HPI: Wednesday, 26th-31st. This indicator is a gauge of the strength of the housing sector. After three straight declines, the indicator posted a strong gain of 1.1% in June, easily beating the estimate of 0.1%. Will we see another gain in the July release?
  4. Preliminary GDP: Wednesday, 8:30. This is the key event of the week. The economy slowed down in the first quarter, with a gain of 0.3%. This missed the estimate of 0.4%. The markets are expecting another gain of 0.3%, and if the reading is softer than expected, the pound could react with losses.
  5. CBI Realized Sales: Thursday, 10:00. Retail and wholesale sales jumped to 12 in June, crushing the estimate of 4 points. Little change is expected in July, with an estimate of 11 points.
  6. GfK Consumer Confidence: Thursday, 23:01. The British consumer remains pessimistic, and the indicator dropped to -10 points in June, its lowest reading since July 2016. The estimate for July is -11 points.

*All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.3109 and climbed to a high of 1.3126. It was all downhill from there, as the pair dropped to a low of 1.2930, as support held at 1.2902 (discussed last week). GBP/USD closed the week at 1.2965.

Technical lines from top to bottom

1.3347 has held in resistance since September 2016.

1.3238 is next.

1.3112 was tested in resistance for a second straight week.

1.3020 is an immediate support line. It is protecting the symbolic 1.30 line.

1.2902 is the next support line.

1.2775 has been a cushion in July.

1.2634 is the final support line for now.

I am neutral on GBP/USD.

The British economy is showing some signs of fatigue and the Brexit cloud is making investors nervous. The Fed is on record that it will raise interest rates a third time in 2017, but the markets have their doubts, as inflation remains weak and second quarter numbers in the US have not impressed.

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Further reading:

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