GBP/USD Forecast Nov. 14-18

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GBP/USD had another strong week, gaining close to 100 points. GBP/USD closed just above the 1.25 level. There are 8 events on the schedule this week. Here is an outlook on the major market-movers and an updated technical analysis for GBP/USD.

The BoE revised upwards its forecast for economic growth, essentially acknowledging that its earlier forecasts of Brexit were far too pessimistic. The BoE also held interest rates at 0.25%, helping fuel the pound’s surge. US Non-Farm Payrolls were upbeat and wage growth improving to 0.3%, above the estimate of 0.2%. The Fed refrained from raising rates last week, but the policy statement was slightly hawkish, as the Fed gave the economy a solid report card.

Updates:

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

gbp_usd_-daily-chart-nov14-18

  1. CPI: Tuesday, 9:30. CPI is the primary gauge of consumer inflation and should be treated as a market-mover. The index improved to 1.0% in September, its highest level since November 2014. Another strong reading is expected in October, with an estimate of 1.1%.
  2. PPI Input: Tuesday, 9:30. This inflation indicator dipped to 0.0% in September, but is expected to jump 1.1% in October. Will the index match or beat the rosy prediction?
  3. RPI: Tuesday, 9:30. RPI includes housing costs, which are excluded from CPI. The indicator improved to 2.0% in September, matching the forecast. The upward swing is expected to continue in October, with an estimate of 2.3%.
  4. Inflation Report Hearings: Tuesday, 10:00. This quarterly report is closely watched as it can provide clues about the BoE’s future monetary policy. With inflation running at higher levels, the report could make interesting reading.
  5. Average Earnings Index: Wednesday, 9:30. Wage growth is a key component of the labor market. The indicator has posted two straight readings of 2.3%, and an identical gain is expected in the September reading.
  6. Claimant Count Change: Wednesday, 9:30. The indicator posted a negligible gain of 0.7 thousand, short of the forecast. The estimate for October stands at 1.9 thousand. The unemployment rate is expected to remain at 4.9%.
  7. CB Leading Index: Wednesday, 14:30. This minor indicator has failed to post a gain since February. The index posted a flat reading of 0.0% in September.
  8. Retail Sales: Thursday, 9:30. Retail Sales is the primary gauge of consumer spending. The indicator came in at 0.0% in September, shy of the forecast of 0.3%. The forecast for the October report stands at 0.5%.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.2485 and touched a low of 1.2336, as support held at 1.2272 (discussed last week). The pair then reversed directions and climbed sharply, touching a high of 1.2674. GBP/USD closed the week at 1.2579.

Live chart of GBP/USD:

Technical lines from top to bottom

With the pair posting sharp gains last week, we begin at higher levels:

1.2915 was a cushion in September but switched to a resistance line after sharp losses by GBP/USD.

1.2778 is next.

1.2620 was a cushion back in 1985.

1.2447 is next.

1.2272 marked the high point in October.

1.2130 is the final support level for now.

I am neutral on GBP/USD.

The US economy continues to move in the right direction, buoyed a very strong labor market. The Fed is expected to raise rates in December, which is bullish for the dollar. At the same time, the UK economy has managed post-Brexit better than expected, and the BoE may be able to avoid further rate cuts if the economy remains steady.

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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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