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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 lost 130 points last week, closing at 1.2165. There are 8 events this week. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.  

In the US, a sparking jobs report has virtually ensured a rate hike coming next week. Still, wage growth disappointed, falling short of the forecast. In the UK, Manufacturing Production dropped sharply and missed the estimate.

Updates:

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

  1. 10-year Bond Auction: Tuesday, Tentative. The 10-year bond dipped to 1.18% in February, down from 1.45% a month earlier.
  2. CB Leading Index: Tuesday, 13:30. The indicator has been stagnant, posting two straight readings at 0.0%. Will we see some movement in the January report?
  3. Average Earnings Index: Wednesday, 9:30. Wage growth dipped in December to 2.6%. The downward trend is expected to continue in January, with an estimate of 2.4%.
  4. Claimant Count Change: Wednesday, 9:30. The indicator sparkled in January, as unemployment rolls shrunk by 42.24 thousand. This was much stronger than expected. The estimate for February stands at +3.2 thousand. The UK unemployment rate is expected to remain at 4.8%.
  5. Official Bank Rate: Thursday, 12:00. The BoE is expected to maintain rates at 0.25%. The MPC will release the vote breakdown for the February rate decision, when the bank held rates. The markets are predicting that the vote for that decision was a unanimous 9-0 vote.
  6. Monetary Policy Summary: Thursday, 12:00. This summary is released on a monthly basis. The report contains discusses economic conditions and could provide clues about the BoE’s future monetary policy.
  7. Asset Purchase Facility: Thursday, 12:00. The BoE’s asset-purchase program is expected to remain at 435 billion pounds. The voting breakdown for the February decision (which remained at 435 billion pounds) is expected to be a unanimous 9-0 vote.
  8. BoE Quarterly Bulletin: Thursday, 12:00. This report is a minor event, and includes commentary on market developments and market analysis.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.2398 and climbed to a high of 1.2399, It was all downhill from there, as the pair dropped to a low of 1.2129, breaking below support at 1.2218 (discussed last week). GBP/USD closed the week at 1.2165.

Live chart of GBP/USD:

Technical lines from top to bottom

We start with resistance at 1.2511.

1.2385 has strengthened in support.

1.2218 has switched to a resistance role following losses by GBP/USD last week.

1.2080 is an immediate support line. It is protecting the symbolic 1.20 level.

1.1943 marked the low point in October 2016.

1.1844 is the final support line for now.

I am bearish on GBP/USD.

The markets have priced in an expected rate hike next week in the US, but the move should still reinvigorate the markets and push up the US dollar. With the Bank of England maintaining a neutral policy regarding rate movement, monetary divergence continues to favor the greenback.

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