The pound posted modest losses last week, as the currency continues to lose ground. GBP/USD closed at 1.6770. It’s a busy week, highlighted by Claimant Count Change and GDP. Here is an outlook for the main events moving the pound, and an updated technical analysis for GBP/USD.
In the UK, most key releases met expectations, led by the Construction and Services PMIs. As expected, the BOE made no changes to monetary policy. The US enjoyed a solid week, as ISM Non-Manufacturing PMI and Unemployment Claims were very strong.
[do action=”autoupdate” tag=”GBPUSDUpdate”/]GBP/USD graph with support and resistance lines on it. Click to enlarge:
- CB Leading Index: Monday, 9:00. The index is composed of 7 economic indicators, but is a minor event since most of the data has already been released. The indicator has been steady, posting two straight readings of 0.5%.
- BRC Retail Sales Monitor: Monday, 23:01. The indicator monitors retail sales in BRC shops, so it has a more narrow scope than the official retail sales release. In June, the indicator posted a weak reading of -0.8%, marking a three-month low.
- Average Earnings Index: Wednesday, 8:30. This is the first key event of the week. The index is an important gauge of consumer inflation, measuring the change in labor costs paid by businesses and government. The index slipped in June to 0.3%, its lowest level in over five years. The markets are braced for worse news, with the estimate standing at -0.1%.
- Claimant Count Change: Wednesday, 8:30. This is one of the most important economic indicators, and an unexpected reading can quickly affect the movement of GBP/USD. The indicator continues to post strong declines, with five of the past six readings better than the estimates. Another strong reading is expected in July, with an estimate of -29.7 thousand. The unemployment rate has been steadily dropping in 2014, and the downward trend is expected to continue in the upcoming release, with an estimate of 6.4%.
- BOE Inflation Report: Wednesday, 9:30. Analysts play close attention the Inflation Report, which contains the BOE’s forecasts for inflation and economic growth over the next two years. Stronger growth and inflation levels can lead to higher interest rates, which is bullish for the pound. BOE Governor Mark Carney will host a press conference about the Inflation Report.
- RICS House Price Balance: Wednesday, 23:01. The indicator measures the change in prices reported by property surveyors, which helps analysts gauge activity in the housing sector. In the previous release, 53% of surveyors reported a price increase, close to the estimate of 55%. The forecast for the July release stands at 51%.
- Second Estimate GDP: Friday, 8:30. This quarterly release follows Preliminary GDP and should be treated by traders as a market-mover. The indicator has been steady, and came in at 0.8% in Q1, matching the estimate. No change is expected in the Q2 reading.
* All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.6825, and quickly moved away from support at 1.6823 (discussed last week). The pair rose to a high of 1.6888. GBP/USD then reversed directions and dropped to a low of 1.6766, closing the week at 1.6770.
Live chart of GBP/USD:
[do action=”tradingviews” pair=”GBPUSD” interval=”60″/]
Technical lines from top to bottom
We begin with resistance at 1.7465. This line has held firm since October 2008. 1.7375 is the next resistance line.
1.7191 was last tested in mid-July. This line marked the high point of a strong rally which began last August, when the pound was trading around 1.52.
1.7108 continues to provide strong resistance.
1.6989 has strengthened as the pair trades below the 1.68 level.
1.6823 has switched to a resistance line as the pound lost ground last week. It is not a strong line and could come under pressure if the pair bounces back.
1.6669 is providing strong support.
Next is the round number of 1.6600. It has remained intact since early April, which marked the start of a rally that saw the pound flirt with the 1.70 line.
1.6466 marked the bottom of a reverse head-and-shoulders in March.
1.6290 is the final support level for now. It has remained intact since early February.
I am bearish on GBP/USD.
The heady days when cable was above 1.70 seem long gone, as the currency continues to struggle. Market sentiment remains supportive of the US dollar as the US recovery continues to gather steam.
Further reading:
- 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.
Share
