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GBP/USD Forecast and technical analysis ► preview 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 a major pair and certainly one of the oldest. The nickname “cable” originates from the fact that the exchange rate was transmitted over the telegraph cable between the UK and the USA.

High volatility characterizes pound/greenback trading. In comparison to some of its peers, stop-loss orders are usually placed at wider margins.

Another characteristic of Sterling trading is that the pair “front-runs” economic releases from Great Britain. We often see a strong market movement ahead of publication. Rumors, leaks or sheer nervousness move GBP USD

The pound is a moderate “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, 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. Post-Brexit GBPUSD forecasts vary by timeframe.

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 has a dilemma amid the drop in standards of living.

The Bank of England has a dilemma amid the drop in standards of living. The pound recovered as the MPC hinted about a rate hike, but it could be a one-off event and may not be sustained.

Brexit negotiations seem deadlocked and could extend as the sides coalesce around a transition period. Nevertheless, the government is leaning towards a hard Brexit: more control and less trade and this could hurt the pound.

Latest weekly GBP/USD forecast:

GBP/USD was under pressure as Brexit negotiations remain stuck and worries about the economy persist. The upcoming week features the GDP report and also the government’s Autumn Statement. Here are the key events and an updated technical analysis for GBP/USD.

House prices are not going anywhere fast in Britain, but the greater worries come from politics. The EU is getting ready for Brexit talks to crash, while the ruling Conservative Party is experiencing a rebellion. This isn’t good news for the pound. Economic data was mixed: inflation remained at 3% falling short of projections. On the other hand, annual wage gains stand at 2.2%, which is good news but the lack of reaction exposed the weakness of the pound. Retail sales were not terrible and perhaps expectations were too low.

Updates:

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

  1. Public Sector Net Borrowing: Tuesday, 9:30. The government had to borrow 5.3 billion pounds in September, slightly better than expected and supportive of the pound. A similar figure is likely now. Lower lending is better for the currency. A level of 6.6 billion is on the cards now.
  2. CBI Industrial Order Expectations: Tuesday, 11:00. The level of diffusion, as reported by the Confederation of British Industry, disappointed in the past two months. The fall to -2 points reflects expectations for a lower volume of orders. A bounce back to positive ground, to +3 points, is forecast now.
  3. Autumn Forecast Statement: Wednesday, 12:30. Chancellor of the Exchequer Phillip Hammond will present new government policy in the British parliament. Fresh forecasts regarding growth, inflation, and employment will be of interest, but Brexit could grab the headlines. Hammond is one of the leaders of the soft-Brexit camp and the internal fights could surface in his appearance. The session could be long and volatile for the pound.
  4. UK GDP (second release): Thursday, 9:30. According to the first estimate for Q3, the British economy grew at a rate of 0.4%, higher than the previous two quarters of 2017. Nevertheless, this is a slower rate than its peers in the euro-zone and the US. In addition, it is weaker than in 2016. The second release will likely confirm this growth rate.
  5. CBI Realized Sales: Thursday, 11:00. The second publication by the CBI has been even worse last month, but this is a very volatile indicator. Realized sales plunged from +42 to -36 in October and could rebound now. +5 is projected.
  6. High Street Lending: Friday, 9:30. This measure of mortgages has been quite stable of later, standing at 41.6K in September, very similar to August. Can we expect a slide now? A level of 40.9 is estimated.

GBP/USD Technical Analysis

Pound/dollar kicked off the week with a downfall, slipping to support around 1.3050 mentioned last week before stabilizing.

Technical lines from top to bottom:

The recent cycle high of 1.3620 serves as strong resistance. 1.35 was the post-Brexit high and remains the top level.

It is followed by 1.3370 which capped the pair several times in 2016. The previous 2017 high of 1.3270 is the next barrier. 1.3225 was the high point of September.

It is followed by 1.3180, which capped the pair in July. 1.3120 served as resistance twice in the summer of 2017 and remains important.

Below, 1.3050 is a double top as seen during the spring of 2017. 1.2975 awaits on the lower side of 1.30.

Further below, 1.2890 separated ranges on the way down. It is followed by 1.2820 and 1.2775.

I remain bearish on GBP/USD

It is really hard to be optimistic about the prospects of Brexit talks as well as the future of the May government. In addition, economic indicators are beginning to lean lower.

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