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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 continued to slide, as the pair fell for a third straight week, losing 210 points. GBP/USD closed at 1.2278, its lowest weekly close since late October. There are only three events this week. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.  

In the US, GDP third quarter growth beat expectations with an excellent reading of 3.5% but durable goods orders were mixed. Consumer confidence also looked sharp, rising for a second straight month. In the UK, Final GDP came in at 0.6%, above the forecast of 0.5%.

Updates:

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

  1. BBA Mortgage Approvals: Wednesday, 9:30. The indicator improved to 40.9 thousand in October, above the forecast of 38.8 thousand. The upswing is expected to continue in November, with an estimate of 41.6 thousand.
  2. Nationwide HPI: Thursday, 7:00. In November, the index edged up to 0.1%, shy of the forecast of 0.2%. The estimate for the December report stands at 0.2%.
  3. Housing Equity Withdrawal: Friday, 9:30. The indicator showed an upsurge in loans in Q2, with a reading of GBP -12.6 billion. This was much higher than the estimate of GBP -5.4 billion. The estimate for Q3 is GBP -11.1 billion.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.2487 and quickly climbed to a high of 1.2502, as resistance held at 1.2512 (discussed last week). It was all downhill from there, as the pair dropped to a low of 1.2228. GBP/USD closed the week at 1.2278.

Live chart of GBP/USD:

Technical lines from top to bottom

With GBP/USD posting sharp losses, we begin at lower levels:

1.2674 was a cap in November.

1.2512 was tested in resistance early in the week before the pair posted sharp losses.

1.2311 has switched to a support role. It is an immediate line.

1.2201 follows in support.

1.2080 is protecting the symbolic 1.20 level.

1.1943 is the final support line for now.

I am neutral on GBP/USD.

Trading volumes are usually light the week of Christmas and there are only a handful of major events on the calendar. So, we’re unlikely to see any significant move from the pair.

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Further reading:

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