GBP/USD Forecast May 23-27

GBP/USD  posted strong  gains  last week, climbing 150 points. The  pair closed the week just under the 1.45 line. This week’s key event is Second Estimate GDP. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.

The Fed meeting minutes were surprisingly hawkish,  putting a June rate hike firmly on the table.  US unemployment numbers were within expectations and housing numbers beat the estimate. British CPI and Claimant Change missed their estimates, but the pound shrugged off these releases.

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

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

GBPUSD_ Daily Chart May23-27..

  1. Public Sector Net Borrowing: Tuesday, 8:30. The deficit narrowed to GBP 4.2 billion in March, beating the estimate of GBP 5.6 billion. However, the deficit is expected to widen to GBP 6.3 billion in the April report.
  2. CBI Realized Sales: Tuesday, 10:00. The indicator continues to lose ground, dropping 13 points in April, shocking the markets which had expected a strong gain of 15 points. The estimate for the May estimate stands at 6 points.
  3. Second Estimate GDP: Tuesday, 8:30. Preliminary GDP for Q1 posted a gain of 0.4%,  matching the  forecast. The  estimate for Second Estimate GDP stands at 0.5%.
  4. Preliminary Business Investment: Tuesday, 8:30. This  indicator is released every  quarter,  magnifying the  impact of each  release. The indicator has been losing ground and posted a decline of 2.1% in the fourth quarter. The markets are expecting a strong turnaround in Q1, with the estimate standing  at 3.2%.
  5. GfK Consumer Confidence: Wednesday, 23:05. The indicator declined 3 points in April, pointing to a pessimistic UK consumer. Little change is expected in the May report, with an estimate of -4 points.
  6. Nationwide HPI:  Friday, 27th-3rd. This housing inflation index provides a snapshot of the level of activity in the UK housing sector. The indicator slipped to 0.2%, its  weakest gain since November 2015.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.4350. The pair  quickly dropped to a low of 1.4332 and then reversed directions. The pair  climbed to a high of 1.4663, testing resistance at 1.4635 (discussed last week). GBP/USD closed the week at 1.4497.

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

Technical lines from top to bottom

 We begin with resistance at 1.4849.

1.4752 is next.

1.4635 has been a resistance line since early February. It held firm last week as GBP/USD posted strong gains.

1.4562 is a weak resistance line. It could see further action early in the week.

1.4413 was a cap in January. It is an immediate support line.

1.4297 is protecting the 1.43 line.

1.4148  is next.

1.4038 is the final support level for now.

I am  bearish on GBP/USD.

With the Fed weighing a rate hike in June, monetary divergence will favor the US dollar. As well, the Brexit referendum continues to cause uncertainty in the UK, which is weighing on cable.

In our latest podcast we examine the road to a June hike (or not)

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Further reading:

Kenny Fisher

Kenny Fisher

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.