GBP/USD continued falling, yet in a choppy manner amid mixed top-tier figures and a problematic advance on Brexit. The BOE also added to the mess. The upcoming week’s highlight is the final GDP report. Here are the key events and an updated technical analysis for GBP/USD.
EU leaders formally approved moving to the next phase of Brexit talks, but trade relations could remain complicated. In addition, May’s government suffered a defeat in parliament and the vulnerability was exposed. Data was mixed: inflation did not fall but actually breached the 3% y/y level. Retail sales jumped by 1.1% amid rising wages, but jobless claims rose than expected. All in all, the economy is looking mixed and a lot depends on what Brexit negotiations yield.Updates:
- Dec 22, 15:02: US durable goods orders fall short of expectations – USD still stable: Orders of durable goods rose by 1.3% in November, lower than 2% expected. Looking at core orders, we already have...
- Dec 22, 10:30: UK Q3 GDP final read upgraded to 1.7% y/y – GBP/USD ticks up: The British economy grew by 0.4% in Q3 2017 also according to the final read, but on a yearly basis,...
- Dec 21, 14:34: US GDP Q3 revised down to 3.2% in the final read – USD ignores: 3.3% was expected, so this is a small downgrade. The core PCE was also downgraded from 1.4% to 1.3%. The...
- Dec 20, 17:30: USD slides against majors amid potential tax signature delay: EUR/USD made a clear break above the resistance line of 1.1860, reaching a high of 1.19, just below the next...
- Dec 20, 12:02: Brexit: EU suggests end 2020 as the end of the transition – GBP ignores: This means a transition period of 21 months from the end of the Article 50 expiry on March 29th 2019...
- Dec 19, 10:52: GBP/USD: stability is misleading – why it break the double bottom: Foreign exchange trading is beginning to enjoy the holidays: currency pairs are taking a break and not going anywhere fast....
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- CBI Industrial Order Expectations: Monday, 11:00. This measure of the manufacturing sector by the Confederation of British Industry jumped to 17 points in November. The 550-strong survey is expected to remain positive but to slide to 14 points in December.
- CBI Realized Sales: Wednesday, 11:00. This measure by the CBI came out with even better numbers: 26 points amid its pool of 125 retail and wholesales firms. A drop to 21 points is on the cards now.
- GfK Consumer Confidence: Thursday, 00:01. The survey of around 2000 consumers showed a disappointing score of -12 points in November, implying a decrease in spending. A repeat of the same figure is on the cards for December.
- Public Sector Net Borrowing: Thursday, 9:30. Government borrowing has reached 7.5 billion pounds in October, worse than expected. Another rise to 8.6 billion is expected now. Higher government borrowing is negative for the economy in the longer run.
- Final GDP: Friday, 9:30. The third and final read of Q3 GDP will likely confirm the quarterly growth rate of 0.4% q/q. However, changes to the composition of growth and revisions to the y/y change are quite common. All in all, the economy grew at a slower pace in 2017.
- Current Account: Friday, 9:30. The UK has a significant current account deficit as well as a widening trade balance deficit. The current account stood at a negative 23.2 billion pounds in Q2. A narrower 21.3 billion deficit is on the cards for Q3. A big surprise in this figure can steal the show from the GDP figure.
BP/USD Technical Analysis
Pound/dollar tried moving higher but could not breach the 1.35 level (mentioned last week). It eventually dropped to lower ground.
Technical lines from top to bottom:
The recent cycle high of 1.3620 serves as strong resistance. 1.3550 was the November peak.
1.3450 capped the pair in mid-December and serves as resistance. The round level of 1.33 is a key level of support, working as such around the same period of time.
1.3225 was the high point of September. It is followed by 1.3180, which capped the pair in July.
1.3080 worked as support in mid-October and also was weak support during November. 1.3030 is the bottom of the range, cushioning cable in October and also in early November.
I remain bearish on GBP/USD
With Brexit talks not leading to a positive outcome on trade, worrying signs of rising unemployment and a dovish central bank, it is hard to see reasons for the pound to rise.
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