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The  British pound  posted strong gains  last week, as GBP/USD climbed about 120 points. The pair closed just shy of the 1.57 line. The upcoming week is a busy one, highlighted by Claimant Count Change and Retail Sales.  Here is an outlook on the major events moving the  pound and an updated technical analysis for GBP/USD.

The US dollar  boasted some upbeat  data last week, including  a strong retail sales report  and  an excellent consumer confidence report. However, this was not enough to prevent the pound moving higher. British numbers were mixed as Manufacturing Production declined 0.7%, while NIESR GDP Estimate posted a third straight gain of 0.7%. The pound managed to tick up in range, but not make a meaningful breakout. This week could certainly be different.

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

GBPUSDForecast Dec.15-19

  1. Rightmove HPI:  Monday, 00:01. The indicator has been alternating between gains and declines, and came in at -1.7% last month. The markets will be hoping for a gain in the upcoming reading.
  2. CBI Industrial Order Expectations: Monday, 11:00. This manufacturing indicator posted a gain of 3 points in November, following two straight declines. No change is expected in the December reading.
  3. Bank Stress Test Results:  Tuesday, 7:00. The stress tests will be administered to eight banks and help determine the banks’ stability and new capital requirements.  Weak results could undermine confidence in the  banking sector and weigh on the pound.   The BOE will release its Financial Stability Report and the quarterly Financial Policy Committee Statement at the same time.
  4. BOE Governor Mark Carney Speaks: Tuesday, 9:00. Carney will host a press conference following the release of the FPC statement. The markets will be looking for clues as to the BOE’s future interest policy.
  5. CPI:  Tuesday, 9:30. CPI is the primary gauge of consumer inflation and can have a significant effect on the movement of GBP/USD. The index posted a gain of 1.3% last month and little changed is expected in the upcoming release.
  6. PPI Input:  Tuesday, 9:30. This index measure inflation in the manufacturing sector. The indicator has not posted a gain in 2014 and came in at -1.5% in October. The estimate for the December indicator stands at -1.1%.
  7. RPI: Tuesday, 9:30. The Retail Price Index is similar to CPI, but includes housing prices. The index has edged lower in the second half of 2014, coming in at 2.3% in October. The downturn is expected to continue, with the November standing  at 2.2%.
  8. Average Earnings Index:  Wednesday, 9:30. The indicator has been moving higher and climbed to a gain of 1.0% in October, marking a 6-month high. The markets are expecting a stronger reading in November, with an estimate of 1.3%.
  9. Claimant Count Change:  Wednesday, 9:30. Claimant Count Charge is one of the most important indicators and should be treated by traders as a market-mover. The indicator continues to post declines and recorded a decline of 20.4 thousand in October. The estimate for the upcoming release stands at -19.8 thousand. The estimate for the unemployment rate, which has been above the 6% level since October 2008, stands at 5.9%.
  10. MPC Official Bank Rate Votes:  Wednesday, 9:30. The previous vote was 7-2, with 2 members favoring a hike in rates while the majority were in favor of maintaining  interest rates at 0.50%.  The markets are anticipating another 7-2 vote and a different result could affect the movement of GBP/USD.
  11. MPC  Asset Purchase Facility  Votes:  Wednesday, 9:30.  Analysts closely monitor the voting breakdown of the MPC vote on QE, which is expected to be a unanimous 9-0 decision. A non-unanimous vote indicates some dissension by policymakers as to the desirable QE level.
  12. Retail Sales:  Thursday, 9:30. Retail Sales is the primary gauge of consumer spending, which is a key engine of economic growth. The indicator surprised with a strong gain of 0.8%, well above the estimate of 0.4%. This marked a 6-month high. The forecast for the upcoming release stands at 0.3%.
  13. GfK Consumer Confidence:  Friday, 00:05. The indicator continues to post readings in negative territory, pointing to ongoing pessimism amongst consumers.
  14. Public Sector Net Borrowing:  Friday, 9:30. The indicator posted a deficit of 7.1 billion pounds in October, within e expectations. The markets are bracing for a much higher deficit in November, with an estimate of 14.8 billion.
  15. CBI Realized Sales:  Friday, 11:00. The indicator is based on a survey of retailers and wholesalers. The indicator has been losing ground in recent readings, slipping to 27 points in the previous reading. The  upcoming reading stands at 30 points.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD  opened the week at 1.5586 and  dropped to  low  of 1.5541. The pair then  reversed  directions,  climbing to a high of 1.5757  and testing resistance at 1.5746 (discussed last week). GBP/USD closed at  1.5699.

Live chart of GBP/USD:

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Technical  lines from top to bottom

We  begin with resistance at 1.6130. This line has  remained intact  since late October.

1.6002 is protecting  the psychologically important 1.60 level. This is followed by 1.5911.

1.5746  was tested  for a  third consecutive week  as the pound flexed some muscle.  This line was an important support level in January 2013.

1.5625  is an immediate support line. It has switched to a support role following strong gains by the pound. The next support line is 1.5539.

1.5290 was a cushion in July 2013. It is the final support line for now.

I  am neutral  on GBP/USD.

The markets will be keeping a close on the FOMC statement, looking for  clues regarding a rate hike next year. In the UK, economic numbers have been unspectacular but steady, as the BOE is also  expected to raise rates in 2015.

In our latest podcast we talk about US jobs, the ECB’s dilemma, a run down of slippery oil and an interesting interview with Itai Furman.

Download it directly here.

Further reading: