Browsing: GBP USD Forecast

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:

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.

Our latest podcast is titled Draghi Dud and the Petrol Pendulum

Follow us on Sticher or iTunes

Safe trading!

Further reading:

Get the 5 most predictable currency pairs
1 2 3 4 5 45