Browsing: GBP USD Forecast

GBP/USD enjoyed some upbeat PMI figures to recover but things became more complicated later on. The White Paper on Brexit, manufacturing production, and other figures await the pound. Here are the key events and an updated technical analysis for GBP/USD.

Contradicting reports about the government’s stance on Brexit move the pound back and forth as well as the PMI data. In the US, data was positive and fears about trade were subsided for a while.

Update: Theresa May lead the British government to sign off on a softer version of Brexit, practically supporting a continued membership of the Customs Union. However, Brexit minister David Davis resigned in anger, taking with him a few deputies and triggering fears that the government is about to collapse. The conseuqent resgination of Foreign Secretary Boris Johnson sent the pound tumbling down, but it is unclear if May’s government is indeed in danger. A buying opportunity on the pound? The political crisis seems to be under control and the rebels may be planning their mutiny for the fall. In the meantime, the focus in the UK is on England’s performance in the World Cup.

Updates:

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

  1. White Paper on Brexit: Monday. The British government is having hard deliberations over Brexit and is set to produce its White Paper on future relations on Monday. This comes after a meeting at Chequers on Friday. The EU is quite frustrated with the UK’s leg-dragging on Brexit and the clock is ticking. The response by Chief EU Negotiator Michel Barnier is no less important than the contents of the document. An immediate breakthrough is highly unlikely.
  2. BRC Retail Sales Monitor: Monday, 23:01. The British Retail Consortium’s measure of sales at its members’ stores increased by 2.6% y/y in May. The figure for June will likely be upbeat as well.
  3. Manufacturing Production: Tuesday, 8:30. Output in the manufacturing sector dropped sharply by 1.4% in April. The month of May was probably better and an increase is likely. The broader industrial production measures fell by a more moderate 0.8%.
  4. Goods Trade Balance: Tuesday, 8:30. Britain’s trade balance deficit widened to no less than 14 billion in April, a worrying level. We could see it narrow down in May.
  5. Construction Output: Tuesday, 8:30. The construction sector enjoyed an increase in activity in the spring with an increase of 0.5% in output. We could see another positive, yet more moderate increase in May.
  6. RICS House Price Balance: Wednesday, 23:01. The Royal Institution of Chartered Surveyors reported a better balance in prices in May: only -3%. This is still in negative territory, but better than in previous months.
  7. BOE Credit Conditions Survey: Thursday, 8:30. This survey by the Bank of England discussed expanding credit in previous quarters. We will now get the report for Q2 2018.

* All times are GMT

GBP/USD Technical analysis

Pound/dollar kicked off the week in an upbeat mood, challenging the 1.3200 level mentioned last week.

Technical lines from top to bottom:

1.3615 capped the pair in late 2017. 1.3470 was a swing high in early June.

The round number of 1.34 could provide further support. Further down, 1.3315 was a swing high in late June.

1.3250 was a swing low in early June. Even lower, 1.3205 was the low point in late May. 1.3100 was a swing low in mid-June and 1.3050 is the latest 2018 low. The round number of 1.3000 awaits below

I remain bearish on GBP/USD

It is hard to believe that the EU will accept anything that the UK proposes. Even if they welcome the proposals, time is running out for Brexit and the UK economy is lagging behind the American one.

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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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