Browsing: GBP USD Forecast

The British pound had a rough week, as GBP/USD fell over 1 percent. There are three events in the upcoming week. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

In the UK, jobless claims came in at 12.1 thousand, well below the estimate of 170 thousand. Wage growth slipped to 2.8%, down from 3.1%. The unemployment rate climbed to 4.0%, up from 3.9%. Consumer inflation continues to fall and dropped to 1.5%. This was down from 1.7 percent. PMIs headed lower in March. Manufacturing PMI slipped to 32.9, down from 48.0 points. The services PMI is in free-fall, and dropped to 12.3 points, down from 35.7 a month earlier.

In the U.S., jobless claims dropped to 4.4 million, down from 5.5 million a week earlier. In the past five weeks, new jobless claims have totaled a staggering 26 million, as the Covid-19 crisis has shut down much of the U.S. economy. There was more bad news from March durable goods orders, which plunged by 14.4%, its first decline in four months. The core reading declined by 0.2%, after a decline of 0.6%. The UoM Consumer Sentiment slumped to 71.8, down sharply from 89.1 a month earlier. Still, this beat the estimate of 67.8 points.

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

  1. CBI Realized Sales: Tuesday, 10:00.  Sales volume dropped to -3 points in March, the first drop in four months. Still, this reading was much better than the forecast of -15 points. Analysts are braced for a sharp drop to -45 points in the upcoming release.
  2. BRC Shop Price Index: Tuesday, 23:01. Retail sales in BRC shops continue to rack up declines. The March reading of -0.8% was the weakest figure since February 2018. Will we see an improvement in the April release?
  3. Final Manufacturing PMI: Friday, 8:30. The PMI slowed to 47.8 in March, down sharply from 51.7 points. The index is projected to slide to 32.8 in April, which is deep in contraction territory.

Technical lines from top to bottom:

1.2728 has held in resistance since early March. 1.2616 is next.

1.2535 has some breathing room in resistance after GBP/USD posted sharp losses.

1.2420 (mentioned last week) switched to a resistance role last week.

1.2330 is a weak support level. It could break early next week.

The round number of 1.22 has provided support since the first week in April.

1.2080 is protecting the symbolic 1.20 level. It is the final support line for now.

I remain bearish on GBP/USD

The Corvid-19 virus has hit the UK hard, causing over 20,000 deaths. The economy is expected to decline sharply, which will likely hurt the British pound.

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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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