GBP/USD posted modest gains on the week, closing at 1.6375. It’s a very busy week, with 17 releases on the schedule. Here is an outlook for the main events moving the pound, and an updated technical analysis for GBP/USD.
British releases were uneventful last week. In the US, Unemployment Claims jumped but retail sales improved in November.Updates:
- Rightmove HPI: Monday, 00:01. This house inflation indicator is an important gauge of activity in the housing market. The index posted a decline of 2.4% last month, its third decline in four releases. The markets are hoping for a better result for November.
- CPI: Tuesday, 9:30. This is the primary inflation indicator and often moves GBP/USD. The index dropped to 2.2% in October, short of the estimate of 2.5%. The estimate for November also stands at 2.2%.
- PPI Input: Tuesday, 9:30. This inflation indicator has looked sluggish, posting three straight declines. Little change is expected for this month’s reading, with an estimate of -0.5%.
- RPI: Tuesday, 9:30. RPI dropped to 2.6% last month, its lowest level in over a year. The markets are expecting a similar reading for November, with an estimate of 2.7%.
- CBI Industrial Order Expectations: Tuesday, 11:00. This important manufacturing indicator shot up to 11 points last month, crushing the estimate of 0 points. Another strong reading is expected ,with the estimate standing at 12 points.
- BOE Governor Mark Carney Speaks: Tuesday, 15:30. Carney will testify before the House of Lords Economic Affairs Committee in London. His remarks will be closely watched and could cause some volatility in GBP/USD.
- Claimant Count Change: Wednesday, 9:30. This is one of the most important economic indicators. It has been posting strong declines in recent releases, as the UK employment picture improves. The estimate for the upcoming release stands at -35.2K. The Unemployment Rate is expected to remain unchanged at 7.6%.
- MPC Asset Purchase Facility Votes: Wednesday, 9:30. This indicator looks at the breakdown of the recent BOE decision on QE, which was to maintain levels at 325 billion pounds. The breakdown for the vote is expected to have been 9-0.
- MPC Official Bank Rate Votes: Wednesday, 9:30. At the last BOE policy meeting, the Bank kept the benchmark interest rate unchanged at 0.50%. The breakdown for the vote is expected to have been 9-0.
- Average Earnings Index: Wednesday, 9:30. This indicator is an important gauge of consumer inflation. The indicator has posted straight releases with a 0.7% gain, and the estimate for the upcoming release stands at 0.8%.
- CBI Realized Sales: Wednesday, 11:00. CBI Realized Sales has looked weak in the past couple of months. The last release came in at just 1 point, well off the estimate of 12. points. The markets are expecting a strong improvement in the upcoming release, with an estimate of 9 points.
- Retail Sales: Thursday, 9:30. Retail Sales is the primary gauge of consumer spending. The key indicator disappointed last month, declining by 0.7%. This was well short of the forecast of 0.0%. The estimate for the November release stands at 0.3%.
- BOE Quarterly Bulletin: Friday, 00:01. This release includes commentary on the markets and on monetary p0licy. As a minor event, it is unlikely to have a major impact on GBP/USD.
- GfK Consumer Confidence: Friday, 00:05. Although the British economy is picking up steam, consumer confidence is lagging behind. The previous release came in at a dismal -12 points and little change is expected in the upcoming release.
- Current Account: Friday, 9:30. The UK continues to post current account deficits, and last month’s figure of -13.0 billion pounds was much higher than the estimate of -11.2 pounds. The estimate for the November reading stands at -13.8 billion.
- Final GDP: Friday, 9:30. GDP readings are always eagerly awaited by the markets. This indicator is released each quarter, which magnifies the impact of each release. The indicator improved to 0.7% in Q2, matching the estimate. The markets are expecting another strong release in Q3, with an estimate of 0.8%.
- Public Sector Net Borrowing: Friday, 9:30. The public sector deficit has been shrinking and dropped to 6.4 billion pounds last month. However, this was well above the estimate of 4.8 billion. A similar reading is expected for November.
* All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.6327. The pair climbed to a high of 1.6465, but then reversed directions and dropped to a low of 1.6339. The pair closed at 1.6375, as support at 1.6343 (discussed last week) remained intact.
Live chart of GBP/USD:
Technical lines from top to bottom
We begin with resistance at 1.6990, which is protecting the key 1.70 level. This line has remained intact since October 2008.
Next is resistance at 1.6705, which has held firm since May 2011. This is followed by the round number of 1.6600.
1.6475 has held firm since August 2011. This is followed by 1.6343, which was breached for a third week and begins the week in a support role. It is a weak line and could be tested early in the week.
1.6247 continues to provide the pair with support. This was a key resistance line in October and November 2012.
1.6125 is next. This line has strengthened as GBP/USD trades at higher levels and has held steady since late November.
The round number of 1.60, a key psychological barrier, is providing strong support. Next is 1.5893 which saw action in November.
1.5752 is the final support line for now. It was breached in mid-September by the surging pound but has provided solid support since then.
I am neutral on GBP/USD.
The pound has looked strong and continues to hold its own against the US dollar. The British economy continues to pick up steam, which is good news for the pound. For its part, the dollar could get a boost as speculation swirls over a possible QE taper this week.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.