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GBP/USD  posted gains  for a  third straight week, closing  at  1.4454. This week’s highlight is CPI. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.

The Federal Reserve  issued a very dovish policy statement and lowered its projections of rate hikes in 2016,  weakening the US dollar. The pound also received a boost from UK Claimant  Change, which  sparkled with a sharp drop of 18.0  thousand, much lower than expectations.

[do action=”autoupdate” tag=”GBPUSDUpdate”/]

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

GBPUSD_ Daily Chart Mar21-25

  1. Rightmove HPI: Monday, 00:01. This housing inflation indicator provides a snapshot of the level of activity in the UK housing sector. The  index was unexpectedly strong in February, posting a gain  of 2.9%. This marked its strongest reading in 8 months.
  2. CBI Industrial Order Expectations: Monday, 11:00. The index continues to post sharp declines, pointing to deep pessimism amongst manufacturers. The indicator came in at -17 points in February, well short of the forecast of -11 points. The markets are braced for another sharp decline, with the estimate standing at -13 points.
  3. CPI: Tuesday, 9:30. CPI is the primary gauge of consumer inflation and should be treated as a market-mover. The index has been creeping higher in recent readings, and edged up to 0.3% in January, matching the forecast. The upward swing is expected to continue in February, with an estimate of 0.4%.
  4. PPI Input: Tuesday, 9:30. This manufacturing inflation index has looked dismal, posting three straight declines. The markets are expecting better news in February, with an estimate of 0.4%.
  5. Public Sector Net Borrowing: Tuesday, 9:30. The indicator posted a surplus in January of GBP 11.8 billion, its first surplus in six months. The markets are anticipating a return back to a deficit in February, with a forecast of GBP 5.4 billion.
  6. RPI:  Tuesday, 9:30. RPI includes housing costs, which are excluded from CPI. The index has been rising since the end of 2015, and the January reading improved to 1.3%, within expectations. Another gain of 1.3% is the estimate for the February report.
  7. Retail Sales: Thursday, 9:30. Retail Sales is a key gauge of consumer spending and an unexpected reading can have a sharp impact on the direction of GBP/USD. The indicator rebounded in January with a sharp gain of 2.3%, well above the estimate of 0.8%.
  8. CBI Realized Sales: Thursday, 11:00. This indicator softened significantly in February, posting a gain of 10 points. This was well short of the estimate of 16 points. Will we see a rebound in the March report?

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.4378. The pair  dropped to low of 1.4051 and then reversed ground, climbing to a high of 1.4514, as resistance held firm at 1.4562  (discussed last week). GBP/USD pair closed the week at 1.4455.

Live chart of GBP/USD: [do action=”tradingviews” pair=”GBPUSD” interval=”60″/]

Technical lines from top to bottom

We begin with resistance at 1.4815. This line was last tested in January.

1.4725 is next.

1.4635 has been a resistance line since early February.

1.4562 held firm in resistance last week.

1.4346 is an immediate support level.

1.4227 is next.

1.4148 was a cushion in late January.

The  round number  of 1.40 is the final support line for now. It was last breached in March 2009.

I am  bearish on GBP/USD.

The  pound has  impressed in  March, raising the possibility of a correction this week due to profit taking. US fundamentals remain stronger than the UK, and although the Fed did not make a move in March, the bias remains towards tightening. This monetary divergence favors the US dollar.

 

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