GBP/USD Forecast Oct. 26-30 – Pound punches above 1.30 on solid CPI

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GBP/USD continues to show volatility. The pair gained one percent last week, erasing the losses from a week earlier. The upcoming week has three events. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

A strong CPI release sent the pound sharply higher on Wednesday. CPI rose to 0.5% in September, up from 0.2% beforehand. The core reading accelerated to 1.3%, up from 0.9%. Retail sales improved to 1.5% from 0.8%, easily beating the estimate of 0.0%. PMIs slowed in September. Manufacturing PMI dropped from 54.3 to 53.3, while Services PMI fell from 55.1 to 52.3 points.

In the US, jobless claims fell sharply to 787 thousand, down from 898 thousand beforehand. This was the lowest level since March, prior to the spread of Covid-19, which sent unemployment levels skyrocketing. Manufacturing PMI came in at 53.3, just shy of the estimate of 55.5 points. The Services PMI improved to 56.0, beating the estimate of 54.7 points. Both readings indicate expansion, above the 50-level which separates contraction from expansion.

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

  1. CBI Realized Sales: Tuesday, 11:00. The Confederation of British Industry sales volume report jumped to 11 in September, compared to -6 beforehand. However, the consensus for October stands at -2 points.
  2. BRC Shop Price Index: Wednesday, 00:01. This inflation gauge is limited to BRC shops. The index remains has posted two straight readings of -1.6%. Another reading in negative territory is likely in October. 
  3. Net Lending to Individuals: Thursday, 9:30. Consumers cut down on credit in August, as the indicator fell from GBP 3.9 billion to 3.4 billion. Analysts expect an improvement in September, with a forecast of 4.2 billion.                                                                                                                   

GBP/USD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3249, an important monthly line.

1.3113 (mentioned last week) is next.

1.3006 has switched to a support role after strong gains by GBP/USD last week.

1.2914 is providing support.

1.2811 is next.

1.2689 is the final support line for now.

I remain bearish on GBP/USD

The UK and the EU have been unable to reach a deal over Brexit, which could weigh on the British pound. As well, Covid-19 continues to hamper the British economy.

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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.

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