Browsing: GBP USD Forecast

GBP/USD fell 0.6% last week, as the US dollar enjoyed broad gains. The upcoming week has four events, including the Bank of England rate decision. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

The Confederation of British Industry index indicated that retail sales fell in October. The index came in at -23, down from 11 in September. The BRC Shop Price Index continues to contract, pointing to low inflation levels. Consumer credit levels rose to GBP 4.2 billion in September, up from GBP 3.4 billion. This was the highest level since February.

In the US, durable goods orders improved sharply in September. The headline reading soared to 1.9%, up from 0.4%. This crushed the estimate of 0.5%. The core reading improved to 0.8%, up from 0.4%. Advance GDP jumped 33.1% in Q3 its strongest quarter on record. However, it barely recouped the Q2 loss of 31.4%. There was more good news on the employment front, as jobless claims fell to 751 thousand, down from 787 thousand beforehand. Core PCE Price Index, the preferred inflation gauge of the Federal Reserve, edged down to 0.2%, down from 0.3%.

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

  1. Manufacturing PMI: Monday, 9:30. The manufacturing sector continues to show expansion, with readings above the 50-level, which separates expansion from contraction. The index dipped from 55.2 to 54.1 in September, and the estimate for October is 53.3.
  2. Services PMI: Wednesday, 9:30. The index slowed to 56.1 in September, down from 58.8 beforehand. The slowdown is expected to continue in October, with a forecast of 52.3.
  3. Construction PMI: Thursday, 9:30. Construction activity accelerated in September, as the index improved from 54.6 to 56.8. The consensus for October stands at 55.0 points. 
  4. BoE Rate Decision: Thursday, 12:00.  Analysts are expecting more of the same at the BoE policy meeting. Members are expected to hold the Official Bank Rate at 0.10% and maintain QE at GBP 745 billion pounds.                                                                                                

GBP/USD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3319, an important monthly line.

1.3249 has held in resistance since early September.

1.3113 (mentioned last week) is next.

1.3040 remains relevant.

1.2903 is providing support.

1.2761 is next.

1.2689 is the final support line for now.

I remain bearish on GBP/USD

The Brexit deadlock between the EU and the UK continues, with the December 31st deadline looming. We could see significant volatility from the pair this week, as the US holds elections, with concerns that the results could be contested, which would lead to tremendous political uncertainty.

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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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