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The British pound  was unchanged last week, as GBP/USD closed at 1.5382. This week’s highlight is Second Estimate GDP. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.

British inflation levels continues to point downwards, as CPI dipped to just 0.3% in the January report. There  was better news from employment data, as Claimant Count Change posted a sharp drop of 38.6 thousand.  In the US, the Fed minutes limited dollar gains, as policymakers raised concerns that a rate hike might hurt the US recovery. Unemployment claims dropped sharply, but manufacturing numbers disappointed.

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

GBPUSD_Forecast Feb. 23-27

  1. CBI Realized Sales: Monday, 11:00. This indicator is an important indicator of consumer spending, a key component of economic growth.   The indicator slipped to 39 points in January but this beat the forecast of 31 points. The estimate for the February reading stands at 42 points.
  2. BBA Mortgage Approvals: Wednesday, 9:30.  This indicator is an important gauge of activity in the housing sector. In December, the indicator dropped slightly to 35.7 thousand, within expectations. Little change is expected in the January reading, with an estimate of 36.2 thousand.
  3. Nationwide HPI: Thursday, 26th-28th. Nationwide HPI measures inflation in the UK housing sector. The indicator has been steady and posted a gain of 0.3% in the previous reading.
  4. Second Estimate GDP: Thursday, 9:30.  GDP  is one of the most important economic events and can have a strong effect on the movement of GBP/USD. Preliminary GDP in Q3 posted a gain of 0.5%, and the Second Estimate  GDP is expected to post an identical gain.
  5. Preliminary Business Investment: Thursday, 9:30. This indicator is released every quarter, magnifying the impact of each release. The indicator posted a decline of 0.7%, its worst reading in six quarters. This was well short of the forecast of a 2.3% gain. The estimate for Q4 stands at 2.3%.
  6. GfK Consumer Confidence: Friday, 00:05. GfK Consumer Confidence has been struggling, posting four straight declines before the January reading of 1 point. The markets are expecting an improvement in the February report, with an estimate of 3 points.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5402  and dropped to a low of  1.5316, as support held firm at 1.5290 (discussed last week).  The pair then rebounded sharply, climbing to a high of 1.5480. GBP/USD  lost ground late in the week,  closing  at 1.5382.

Live chart of GBP/USD:

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Technical lines from top to bottom

We  begin with resistance at 1.5625, which  has held firm since late December.

1.5539 is the next resistance line.

1.5416 was tested late in the week but remains a weak resistance line.  This line provided  important support in June 2013, at which time the pound broke through and continued to slide and fell below the 1.49 line.

1.5290 held firm in support as the pair dropped close to the 1.53 line early in the week.

1.5114 is a strong support level.

1.5008 is protecting the symbolic 1.50 level.

1.4813 is the final support line for now. It marked the start of a pound rally in July 2013 that saw GBP/USD climb above 1.61.

I am neutral on GBP/USD.

British  GDP will have a large say in the pound’s fortunes this week.  If the key indicator can meet expectations, we could see the pound push higher. In the US, recent  numbers have been lukewarm of late, but the  markets continue to  bank on a  rate hike sometime in 2015.

In this week’s podcast, we cover Questions for traders, State of Fed, Greek crisis, oil, gold and GBP

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