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The British pound  continued to rally last week, as GBP/USD gained over  200 points. The pair closed at 1.5188, marking its first weekly close above 1.50 in almost two months. This week’s highlight are Preliminary GDP and Manufacturing PMI. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.

The US dollar had another awful week, as housing and durable goods orders numbers were a mix. In the UK, Retail Sales was below expectations, but the disappointing news  didn’t hinder the pound’s impressive rally.

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

GBP_USD_Forecast.Apr 27-May1

  1. CBI Industrial Order Expectations: Monday, 10:00. This important manufacturing indicator plunged to  zero points in February, down from 10 points a month earlier. This was well off the estimate of 9 points. The estimate for the March report stands at 4 points.
  2. Preliminary GDP: Tuesday, 8:30. GDP is one of the most important economic  indicators, and an  unexpected reading  can have an immediate impact on the movement of GBP/USD.  In Q3, GDP slipped to 0.5%, close  to the estimate of 0.6%.  The forecast  for  the March report  stands at 0.5%.
  3. Nationwide HPI: Wednesday, 6:00. This index provides a snapshot of activity in the UK housing sector. The index posted a weak gain of 0.1% in February, within expectations.
  4. 10-year Bond Auction: Wednesday, Tentative. The March auction posted a yield of 1.68%. This was almost unchanged from the previous auction in January, with a yield of 1.62%.
  5. CBI Realized Sales: Wednesday, 10:00. This important indicator helps gauge consumer spending. The indicator bounced back in February with an excellent reading of 18 points, within expectations. The upswing is expected to continue in the March report, with an estimate of 26 points.
  6. GfK Consumer Confidence: Wednesday, 23:05. Consumer Confidence improved to 4 points in February, pointing to consumer optimism. The markets are expecting the indicator to improve to 5 points in the March release.
  7. Manufacturing PMI: Friday, 8:30. Manufacturing PMI is a key event which can have a significant effect on the movement of GBP/USD. The index continues to post readings above the 50-point level, pointing to expansion in the manufacturing sector. The February release came in at 54.4 points, almost matching the forecast. Little change is  expected in the March report.
  8. Net Lending to Individuals: Friday, 8:30.  Credit levels are closely linked to spending levels, as increased borrowing usually  translates into more spending  by consumers. The  indicator has been pointing upwards in recent readings, and rose to 2.5 billion pounds in February, matching the forecast. The upward  trend is  expected to continue, with an estimate of 2.6 billion pounds.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.4964 and dropped to a low of 1.4856. It was all uphill after that, as the pair climbed to a high of 1.5188, as resistance  held firm at 1.5215 (discussed last week). This line also  marked the close for the week.

Live chart of GBP/USD:

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Technical lines from top to bottom

With the pound posting  strong  gains, we begin at higher levels:

1.5552 marked the start of a dollar rally in late February, which saw GBP/USD drop close to the 1.50 line.

1.5459 was an important cap in February.

1.5300 has provided resistance since the first week in March.

1.5215 held firm as the pair posted strong gains.

1.5114 has switched to a support role.

1.5008 has strengthened in support as the pound trades at higher levels.

1.4813 marked the start of a pound rally in July 2013 that saw GBP/USD climb above 1.61.

1.4602 is the final support level for now.

I am  bearish on GBP/USD.

With the US dollar  losing  over 500 points in  just two weeks, a  correction  may be in order. Despite some weak US numbers in recent weeks, analysts expect a strong spring, and market sentiment remains positive about the US economy. The pound is back above 1.50, but uncertainty about the upcoming UK election could shake up the pair, and falling inflation remains a serious worry.

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