GBP/USD Forecast Nov. 9-13 – Pound jumps on bandwagon with sharp gains

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GBP/USD climbed 1.58% last week, as the US dollar sustained sharp losses against the G-10 currencies. The upcoming week has four events, including GDP Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

UK Manufacturing PMI continued to show expansion, with another reading above the neutral 50-level. The October reading came in at 53.7 points. However, the services sector slowed, as the PMI fell from 56.1 to 51.4, its lowest level in four months. Construction PMI also slowed, falling from 56.8 to 53.1 points. The Bank of England held rates at 0.10%, but raised QE by GBP 150 billion to 895 billion, which was higher than the forecast of 845 billion.

In the US, ISM Manufacturing PMI was stronger than expected. The index climbed from 55.4 to 59.3, above the forecast of 55.6 points. The Federal Reserve didn’t make any changes, but hinted at more easing in December. US nonfarm payrolls slowed to 638 thousand, but exceeded the estimate of 595 thousand. Wage growth remained steady at 0.1%, while the unemployment rate dropped sharply, from 7.9% to 6.9%. The Ivey PMI improved to 54.5, up from 54.3 points.

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

  1. BRC Retail Sales Monitor: Tuesday, 00:01. This indicator showed that retail sales in BRC shops jumped 6.1% in September, up from 4.7%. This marked a 3-month high. We will now receive the October release. 
  2. Employment Report: Tuesday, 7:00. The UK added 28.1 thousand unemployed persons in October, well below the estimate of 78.8 thousand. Wage growth is projected to rise to 1.0%, up from 0.0% in August. The unemployment rate climbed to 4.5% in August and is expected to rise to 4.7% in September.
  3. GDP: Thursday, 7:00. In the second quarter GDP plunged by 19.8%, reflective of the economic downturn due to Covid-19. Analysts expect a strong rebound in Q3, with an estimate of 15.6%. The monthly GDP is forecast to post a 1.1% gain in September.
  4. Manufacturing Production: Thursday, 7:00. The indicator posted a negligible gain of 0.7% in August, well short of the estimate of 3.2%. Another gain of 0.7% is expected in the September release.                                                      

GBP/USD Technical Analysis

Technical lines from top to bottom:

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

1.3340 is next.

1.3249 has held in resistance since early September.

1.3113 (mentioned last week) is the first line of support.

1.3040 remains relevant.

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

I remain bearish on GBP/USD

The US election drama led to sharp losses for the US dollar, but investors will shift their focus to fundamentals, and the US economy is in better shape than that of the UK. As well, the Brexit talks have still not yielded an agreement, which will continue to weigh on sentiment towards the pound.

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.