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The British pound  showed strong  movement in both directions  last week, and  GBP/USD gained about 180 points. The pair closed the week at 1.4932. This week’s highlights  are CPI and Retail Sales. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.

British key numbers were mostly within expectations, and the pound took advantage of broad US dollar weakness after the Federal Reserve statement last week. The Fed certainly sounded more dovish despite removing the “patience” guidance, raising doubts about a June rate hike.

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

GBPUSD_Forecast Mar.23-27

  1. CBI Industrial Order Expectations: Monday, 11:00. This indicator has been steadily moving higher, and hit 10 points in February. This beat the estimate of 7 points. Another strong reading is expected in March, with an estimate of 9 points.
  2. CPI: Tuesday, 9:30.British inflation levels continue to drop, as underscored by recent CPI readings. The index slipped to 0.3% in January, matching the forecast. The downward trend is expected to continue, with a February estimate of 0.1%. If CPI fails to meet expectations, we could see the pound lose ground.
  3. PPI Input: Tuesday, 9:30.   This manufacturing index has posted 13 straight declines, as deflation has become a serious concern. The January reading came in at -3.7%, well off the estimate of -2.5%. However, the markets are expecting better news in the February report, with an estimate of 1.6%. Will the indicator match or beat the prediction?
  4. RPI: Tuesday, 9:30. Similar to CPI, this important inflation index continues to lose ground. The index slipped to 1.1% in January, within expectations. The downward trend is expected to continue, with the estimate for the February report standing at 0.9%.
  5. BBA Mortgage Approvals:  Wednesday, 9:30. This indicator provides a snapshot of activity in the UK housing sector. The indicator has been very steady, and came in at 36.4 thousand in January, within expectations. Little change is expected in the February release.
  6. Retail Sales: Thursday, 9:30. Retail Sales is the primary gauge of the consumer spending, and should be treated as a market-mover. The indicator posted a decline of 0.3% in January, marking a four-month low. The estimate stood at -0.1%. The markets are anticipating a strong turnaround in the February report, with an estimate of 0.4%.
  7. FPC Statement: Thursday, 9:30. The Financial Policy Committee’s quarterly statement analyzes the UK’s financial stability and risks to the financial system. The statement will be carefully monitored by the markets and can affect the movement of GBP/USD.
  8. CBI Realized Sales:  Thursday, 11:00. The indicator plunged to just 1 point in February, shocking the markets  which had expected a strong reading of 42 points. This reading was the indicator’s worse since November 2013. The March report is expected to bring much better news, with an in estimate of 20 points.
  9. BOE Chief Economist  Andy Haldane Speaks:  Friday, 8:00. Haldane is well respected and his remarks are closely followed by the markets. Haldane will be speaking at an event in Amsterdam.
  10. BOE Governor Mark Carney Speaks: Friday, 8:45. Carney will speak at the Bundesbank conference in Frankfurt. Any hints about the BOE’s  future monetary policy could affect the movement of GBP/USD.
  11. BOE Deputy  Governor  Ben Broadbent  Speaks: Friday, 9:15. Broadbent will deliver remarks at an event in London. A speech which is more hawkish than expected is bullish for the British pound.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.4754 and dropped to a low of 1.4754. The pair then reversed  directions and climbed all the way to 1.5165,  testing resistance at 1.5114  (discussed last week). The pair closed the week at 1.4932.

Live chart of GBP/USD:

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Technical lines from top to bottom

1.5296 has provided resistance since the first week in March.

1.5114 was easily breached by the pair before it retracted. This line starts off the week as strong resistance.

1.5008  is an immediate resistance line.

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

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  bearish on GBP/USD.

The pound flexed some muscle last week, recovering partially from huge losses since late February. The Fed may have dampened expectations of a rate hike in the next few months, but if US employment data and the GDP release are strong, the dollar could reverse directions this week.

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