It was a dismal week for the British pound. GBP/USD plunged 300 points last week and posted a weekly close below the 1.50 line for the first time since April. The upcoming week has six events on the schedule. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.
In the US, the historic rate hike was not dovish as the small move of 0.25 percent is likely just the start of incremental upward rate moves in 2016. The pound posted considerable losses following a very low CPI, more unemployment claimants and weak wage growth.
[do action=”autoupdate” tag=”GBPUSDUpdate”/]GBP/USD graph with support and resistance lines on it. Click to enlarge:
- CBI Realized Sales: Monday, 11:00. CBI has dropped dramatically in the second half of 2015. The indicator posted an excellent reading of 51 points in May, but had fallen to just 7 points in the November report. This figure was nowhere near the estimate of 25 points. The markets are expecting better news in December, with an estimate of 22 points.
- GfK Consumer Confidence: Tuesday, 00:05. Analysts carefully monitor consumer confidence indicators, as stronger consumer confidence often translates into increased consumer spending, a key driver of economic growth. The indicator has been slipping, and dropped to just 1 point in November, indicative of weak optimism. This figure was shy of the forecast of 2 points. Another reading of 1 point is expected in the December report.
- Public Sector Net Borrowing: Tuesday, 9:30. The UK monthly deficit narrowed in October, coming in at GBP 7.5 billion. However, this was much higher than the deficit of GBP 5.5 billion. The markets are braced for a much higher deficit for November, with a forecast of GBP 11.9 billion.
- Current Account: Wednesday, 9:30. Current Account is closely linked to currency demand, as foreigners must purchase British pounds in order to buy British goods and services. The current account deficit narrowed to GBP 16.8 billion in Q2, much better than the forecast of a debt of GBP 22.2 billion. However, the deficit is expected to rise to GBP 21.3 billion in Q3. Will the indicator repeat and beat the prediction?
- Final GDP: Wednesday, 9:30. This is the third and final GDP version. Second Estimate GDP, released in November, posted a gain of 0.5%, matching the estimate. The forecast for Final GDP also stands at 0.5%.
- BBA Mortgage Approvals: Thursday, 9:30. This indicator provides a snapshot of the level of activity in the UK housing sector. In October, the indicator rose to 45.4 thousand, almost matching the estimate. The upward trend is expected to continue in November, with an estimate of 46.2 thousand.
* All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.5195 and quickly touched a high of 1.5205. The pair then reversed directions and dropped throughout the week, dropping to 1.4864 as resistance held firm at 1.4856 (discussed last week). The pair closed the week at 1.4889.
Live chart of GBP/USD: [do action=”tradingviews” pair=”GBPUSD” interval=”60″/]
Technical lines from top to bottom
With the pound sustaining huge losses last week, we begin at lower levels:
1.5269 was a cap in November.
1.5163 continues to be busy and switched to a resistance role.
1.5026 is the next resistance line. It had provided imp
1.4856 is under strong pressure in support. It has remained intact since April.
1.4752 is the next support level.
1.4601 was an important cap in December 2001. It is the final support line for now.
I am bullish on GBP/USD.
Last week’s rate historic hike by the Fed, the first in almost 10 years, is a vote of confidence in the US economy and will likely increase investor confidence in the US dollar, at the expense of major rivals like the pound. If US GDP and jobless claims meet expectations, the dollar could push higher.
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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 kiwi, see the NZD/USD forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the Canadian dollar (loonie), check out the USD to CAD forecast.
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