GBP/USD Forecast June 30-July 4

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GBP/USD was unchanged this week, as the pair continues to trade above the 1.70 level. The pair closed the week at 1.7019. This week’s highlights are the PMI releases. Here is an outlook for the main events moving the pound, and an updated technical analysis for GBP/USD.

US GDP for Q1 shocked the markets with a decline of 2.9%. In the UK, BOE Governor Mark Carney sounded more dovish about interest rate increases, saying they would be slow and gradual.

Updates:

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

GBPUSD Forecast June30-July4

  1. Net Lending to Individuals: Monday, 8:30. Analysts follow this indicator since an increase in lending often leads to greater spending, which is critical for economic growth. The indicator softened in May, coming in at 2.4 billion pounds, short of the estimate of 2.7 billion. The markets are expecting more of the same in the June release, with an estimate of 2.5 billion.
  2. Manufacturing PMI: Tuesday, 8:30. This is the first PMI of the week. The index came in at 57.0 points last month, very close to the estimate. The markets are expecting a slight drop in the upcoming release, with the estimate standing at 56.7 points.
  3. Nationwide HPI: Wednesday, 6:00. Mortgage Approvals are an important gauge of activity in the housing sector, as home buyers usually take out a mortgage to finance the purchase. The indicator has been falling throughout 2014, and dropped to 42.2 thousand last month, shy of the estimate of 45.2 thousand.  The downward trend is expected to continue, with the estimate for the upcoming release at 41.3 thousand.
  4. Construction PMI: Wednesday, 8:30. Construction PMI has been falling throughout 2014,  but remains at high levels. The index dipped to 60.0 points last month, short of the estimate of 61.2. The markets are expecting the downward trend to continue, with an estimate of 59.7 points.
  5. Services PMI: Wednesday, 8:30. The index has been fairly steady, and was almost unchanged in May, with a reading of 58.6 points. This edged above the estimate of 58.3 points. The estimate for June stands at 58.1 points.
  6. Halifax HPI: Friday, 4th-8th. This housing inflation index is an important gauge of activity in the housing sector. The index posted a strong turnaround last month, jumping 3.9%, which crushed the estimate of 0.7%. The markets are bracing for a downturn in the June release, with an estimate of -0.3%.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.7020 and dropped to a low of 1.6953, breaking below resistance at 1.6990 (discussed last week). The pair then reversed directions, and climbed to a high of 1.7050. GBP/USD closed the week at 1.7019.

Live chart of GBP/USD:




Technical lines from top to bottom

We start with resistance at 1.7465. This line has held firm since October 2008.

Next is 1.7375. This line marked the start of a sharp pound rally in March 2006, which saw the GBP/USD climb above 1.82 that month. 1.7180 is the next resistance line.

The pair broke below support at 1.6990 but this line recovered and is providing weak support. It could continue to see action early in the week.

1.6823 is providing strong support.

1.6684 is the next support line. It was an important resistance level in March and early April.

The round number of 1.6600 follows. It has remained intact since early April, which marked the start of a rally that saw the pound flirt with the 1.70 line. 1.6475 is the next support level.

The final support line for now is 1.6343. It saw some activity in early February but has provided strong support since that time.

I am bullish on GBP/USD.

The pound continues to trade above the key 1.70 line. UK numbers remain relatively high, and a rate increase is only a matter of time. Meanwhile, the US has been posting mixed numbers, and it’s a tough sell to blame the awful GDP in Q1 on bad weather. If key US data doesn’t point upward, we could see the pound put move higher.

Further reading:

Get the 5 most predictable currency pairs

About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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