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The British pound  was hard hit for a second straight week,  as the GBP/USD plunged  over 300  points. The pair closed the week at 1.4725. This week’s highlight is Claimant Change. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.

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The US dollar continues to pummel its major rivals, and the pound took another beating last week. UK Manufacturing Production disappointed with a decline of 0.5%. In the US,  unemployment claims were sharply lower, but inflation and consumer confidence numbers missed expectations.

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

GBPUSDForecast Mar.16-20

  1. Rightmove HPI: Monday, 00:01. This indicator provides a snapshot of activity in the UK housing sector. The indicator has been moving upwards, and posted a strong gain of 2.1% in the March estimate.
  2. CB Leading Index: Monday, 13:30.This is a minor event as most of the indicators have already been released. The index improved to 0.1% in December, breaking a streak of three straight declines.
  3. Average Earnings Index: Wednesday, 9:30. The indicator has improved over six straight readings, and posted a strong gain of 2.1%.in December, beating the forecast of 1.7%. The upward trend is expected to continue, with  a January estimate of 2.2%.
  4. Claimant Count Change:  Wednesday, 9:30. This is the key event of the week. The indicator has been posting sharp declines, pointing to an improving labor market. The January report came in at -38.6 thousand, easily beating the forecast of -25.2 thousand. The forecast for the February release stands at -31.0 thousand. The unemployment rate has been moving lower, and dropped to 5.7% in December. The estimate for January stands at 5.6%.
  5. MPC Official Bank Rate Votes: Wednesday, 9:30. The BOE held rates at 0.5% at its last policy meeting, and the markets expect that the decision was unanimous (9-0).
  6. MPC  Asset Purchase Facility  Votes: Wednesday, 9:30. Asset Purchase Facility remains at 375 billion pounds, and the votes have been unanimous since June 2013. No change is expected in the upcoming release.
  7. Annual Budget Release: Wednesday, 00:30. The annual budget is a key event, and should be treated as a market-mover by traders. The markets will   be keeping a close eye on the budget’s spending and borrowing levels.
  8. 10-year Bond Auction:  Thursday, Tentative. The yield slipped to 1.62% in the January yield.
  9. Public Sector Net Borrowing:  Friday, 9:30. The indicator posted a  surplus of GBP 9.4 billion  in January,  very  close to the estimate. The markets are  expecting a deficit in the February report,  with  an estimate of GBP 7.7 billion.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5057 and touched a  high of 1.5137, testing resistance at 1.5114 (discussed last week). It was all downhill from there as the pair plunged all the way to a low of 1.4699. The pair closed the week at 1.4725.

Live chart of GBP/USD:

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Technical lines from top to bottom

With the pair posting  sharp losses last week, we begin at lower levels.

1.5114 was tested early in the week but is currently a strong resistance line.

1.5008  has switched to a resistance role following the pound’s sharp losses.

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

1.4621 was an important cap in August 2001.

1.4521 is the next support line.

The final support level for now is 1.4346, which has remained intact since June 2002.

I am  neutral on GBP/USD.

After the pound’s disappearing act in March, will we see some profit taking  and a correction this  week? In the US, speculation continues over an expected US rate hike, and an expected removal of “patience” by the Fed could strengthen the dollar.

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