GBP/USD enjoyed an excellent week, gaining 240 points. The pair closed at 1.2717. There are nine events this week. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.
In the UK, Manufacturing and Construction PMIs pointed to expansion. The BoE released its Financial Stability Report and said that it sees global risks as a result of the Trump election, which could have negative repercussions for the British economy. In the US, the economy continues to expand at a brisk clip. Preliminary GDP sparkled in Q3 with a gain of 3.2%, beating the estimate of 3.0%. Consumer Confidence data easily beat expectations. Employment numbers were mixed, as Nonfarm Payrolls met expectations, but wages declined.
GBP/USD graph with support and resistance lines on it. Click to enlarge:
- Services PMI: Monday, 9:30. Services PMI improved to 54.5 points in October, above the forecast of 52.5 points. The estimate for November stands at 54.2 points.
- BRC Retail Sales Monitor: Tuesday, 00:01. This indicator gauges retail sales in BRC shops. In October, the indicator posted a strong gain of 1.7%, its highest gain since January.
- FPC Meeting Minutes: Tuesday, 9:30. This minor indicator provides details of the FPC’s most recent meeting. Analysts will be looking for clues regarding the BoE’s future monetary policy.
- 10-year Bond Auction: Tuesday, Tentative. The yield on 10-year bonds continues to climb and reached 1.38% in the November auction. Will the upward trend continue in December?
- BRC Shop Price Index: Wednesday, 00:01. This indicator measures consumer inflation in BRC shops. The index continues to post declines and came in at -1.7% in October.
- Halifax HPI: Wednesday, 8:30. This housing inflation indicator provides a snapshot of the level of activity in the UK housing sector. In September, the indicator posted a strong gain of 1.4%, crushing the estimate of 0.3%. The markets are expecting a weak gain of 0.2% in the October release.
- Manufacturing Production: Wednesday, 9:30. This key indicator should be treated as a market-mover. The indicator improved to 0.6% in September, edging above the forecast of 0.5%. The estimate for the October report stands at 0.2%.
- 30-year Bond Auction: Wednesday, Tentative. The yield on 30-year bonds continues to drop and dipped to 1.49% in the October yield. Will the downward trend continue in the December auction?
- NIESR GDP: Wednesday, 15:00. This monthly indicator helps analysts predict GDP, which is released on a quarterly basis. The indicator has been steady, posting two straight gains of 0.4%.
- Goods Trade Balance: Friday, 9:30. The goods trade deficit widened to GBP 12.7 billion in September, higher than the estimate of a deficit of GBP 11.3 billion. The deficit is expected to narrow to GBP 11.9 billion in October.
* All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.2479 and quickly dropped to a low of 1.2383. The pair then reversed directions and moved upwards during the week, climbing to a high of 1.2736, as resistance held at 1.2778 (discussed last week). GBP/USD closed the week at 1.2717.
Live chart of GBP/USD:
Technical lines from top to bottom
With GBP/USD posting sharp gains, we begin at higher levels:
1.3121 was a cap in September.
1.2860 has provided resistance since early October.
1.2778 is next.
1.2674 was a cap in November.
1.2448 is a weak support line. It could see further action early in the week.
1.2311 is the final support line for now.
I am bearish on GBP/USD.
With a December hike from the Fed a virtual certainty, sentiment towards the greenback is favorable. As Britain gears up for negotiations over Brexit, markets remain concerned that fallout from the country’s departure from the EU will hurt the economy.
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