Browsing: GBP USD Forecast

GBP/USD showed little movement last week. It’s a busy week in the U.K, with employment, inflation and retail sales reports. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.

Britain and the EU agreed to extend Brexit until October, but with Britain hopelessly divided on what happens next, does the extension really change things? The monthly British GDP report showed that the economy slowed to 0.2% in February, compared to 0.5% a month earlier. There was better news on the manufacturing front, as manufacturing production jumped 0.9%, crushing the estimate of 0.2%.

In the U.S., inflation levels pointed higher in March. CPI, the key gauge of consumer spending, climbed to 0.4%, its highest gain since January 2018. The producer price index also looked strong, climbing 0.6%, marking a 5-month high.

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

https://www.tradingview.com/x/AVbF8Rpn/

  1. Employment Data: Tuesday, 8:30. Wage growth has been steady, posting three straight gains of 3.4%. The February estimate stands at 3.5%. Unemployment rolls climbed to 27.0 in February, well above the estimate of 13.1 thousand. A lower reading is expected for March, with an estimate of 17.3 thousand. The unemployment rate is expected to remain pegged at 3.9%.
  2. Inflation Data: Wednesday, 8:30. After losing ground in the second half of 2018, CPI has reversed directions in 2019, and improved to 1.9% in February. The upward trend is expected to continue in March, with a forecast of 2.0%. Core CPI came in at 1.8% in February, and is expected to improve to 1.9% in March.
  3. Retail Sales: Thursday, 8:30. Retail sales is the primary gauge of consumer spending, a key driver of economic growth. The indicator slowed to 0.4% in February and the markets are bracing for a decline of -0.3% in March.
  4. BOE Credit Conditions Survey: Thursday, 8:30. This quarterly report details lending data to consumers and small businesses. An upbeat survey points to stronger economic activity and is bullish for the pound.

GBP/USD Technical analysis

Technical lines from top to bottom:

The round number of 1.34 has held in resistance since June 2018.

1.3375 was a high point in July. It is followed by the round number of 1.3300 which saw activity during the week. It is currently a weak resistance line.

1.3217 was the high point of the pound rally in late January.

1.3170 was a swing high in early November.

1.3070 was a high point in mid-November.

Late in the week, the pair broke through support at the round number of 1.3000 (mentioned last week).

1.2910 has held in support since mid-February,

1.2850 capped recovery attempts in late November.

1.2728 was active in the first half of January.

1.2616 is the final support level for now.

I remain bearish on GBP/USD

Brexit has been extended, but the deadlock in parliament remains, and investors will remain concerned over the political turmoil and uncertainty. The British economy is showing signs of strain, and the pound could lose ground if economic data is not stronger than expected.

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GBP/USD Forecast and technical analysis ► preview of the main events that move the British Pound (Sterling), and especially pound/dollar (cable) during the week. Here are some general data. Scroll down for the latest GBP/USD outlook

Pound/dollar characteristics

GBP/USD is a major pair and certainly one of the first to emerge in modern trade. Its nickname “cable” originates from transmitting the exchange rate over the telegraph cable between the UK and the USA in the 19th century.

Above average volatility characterizes pound/greenback trading. In comparison to other major pairs, stop-loss orders are usually placed at wider margins.

Another tidbit of Sterling trading is that the pair “front-runs” economic publications from Great Britain. We usually see a significant market movement ahead of a release. Leaks, rumors, or sheer nervousness move GBP USD

The pound is a moderate “risk” currency. When the global mood is positive, GBP often gains against the dollar, albeit usually not at the same magnitude as commodity currencies. When markets become risk-averse, Sterling is on the retreat.

Brexit talks 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  Her Majesty’s currency. Brexit has sent Pound/USD to levels last seen in 1985 and despite the recovery, Sterling still suffers.

The economy did well in 2016, before and after the EU Referendum, but it slowed down in 2017. On the other hand, the weak pound pushed inflation above the rises in wages. The Bank of England decided to raise rates in November 2017 but clarified it is a one-off. Mark Carney and his colleagues foresee only two hikes in the next three years.

Brexit negotiations were deadlocked for quite some time, but fresh hopes help the pound stabilize. PM Theresa May may agree to pay the high “divorce bill” that the EU demands.

Latest weekly GBP/USD forecast:

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