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GBP/USD posted gains for a third straight week, rising 0.70%. The upcoming week has three events. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

In the UK, inflation improved in October and beat the forecast. Headline CPI improved from 0.5% to 0.7%, while the core reading climbed from 1.3% to 1.5%. Retail sales slowed from 1.5% to 1.2%, but crushed the estimate of -0.3%. Negotiations continue between London and Brussels on a Brexit deal, with the markets optimistic that an agreement will be reached shortly.

In the US, the Empire State Manufacturing Index fell from 10.5 to 6.3, as the rate of expansion slowed for a second straight month. The Philly Fed Manufacturing Index fell to 26.3, down from 32.3 points. Retail sales fell sharply in October, which weighed on the US dollar. Headline retail sales fell from 1.9% to 0.3%. This was the weakest gain since April. The core reading slowed to 0.2%, down from 1.5% beforehand.

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

  1. Manufacturing PMI: Monday, 9:30. Manufacturing PMI has been slowing down, but still remains in expansionary territory, with readings above the neutral-50 level. The estimate for October stands at 50.5 points.
  2. Services PMI: Monday, 9:30. The services sector has been slowing and dropped to 52.3 in October. Analysts are bracing for a sharp drop in November, with an estimate of 43.2 points, which would indicate contraction.
  3. CBI Realized Sales: Tuesday, 11:00. Sales volume dropped sharply in October, from 11to -23 points. The downturn is expected to continue in November, with an estimate of -32 points.

GBP/USD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3502, an important monthly line.

1.3340 (mentioned  last week) is next.

1.3249 has switched to a support role after gains by GBP/USD last week.

1.3113 is next.

1.3040 has held in support since early November.

1.2903 is protecting the round number of 1.2900. It is the final support level for now.

I am bullish on GBP/USD

The pound has looked sharp, with gains of 2.6% in the month of November. The currency’s fortunes this week could depend on whether a Brexit agreement is announced. It appears that a deal is close and the pound could rally if an agreement is announced.

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