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The  British pound  managed to hold its own against the dollar last week, showing slight losses. The pair closed at 1.5627. This week’s key events  are  the Inflation Report Hearings  and  Second Estimate  GDP.  Here is an outlook on the major events moving the  pound and an updated technical analysis for GBP/USD.

British CPI remained steady at 1.3%, while Retail Sales posted an excellent  gain of 0.8%, beating expectations. In the US, the FOMC meeting minutes  revealed little about the timing of a rate hike, but noted that the Fed is not overly concerned about weak growth in Japan and the Eurozone. Solid data from inflation, home sales and manufacturing didn’t give the greenback a boost against the pound.

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GBP/USD graph with support and resistance lines on it.

GBPUSDForecast Nov.24-28

 

  1. BBA Mortgage Approvals:  Tuesday, 9:30. This indicator has been losing ground in recent readings, slipping to 39.3 thousand in October. This was short of the estimate of 41.5 thousand. The downward trend is expected to continue in the upcoming release, with an estimate of 38.5 thousand.
  2. Inflation Report Hearings: Tuesday, 10:00. This is the key event of the week and it can have a major impact on the movement of GBP/USD. Inflation has been falling in the UK, and the markets will be following the testimonies of BoE Governor Mark Carney and other policymakers before a parliamentary committee.
  3. Second Estimate GDP:  Wednesday, 9:30. GDP is  one of the most important economic indicators  and should be treated by traders as a market-mover. GDP has been very steady, and little change is expected in the Q3 reading, with an estimate of 0.7%.
  4. Preliminary Business Investment:  Wednesday, 9:30.This indicator is  released each quarter, magnifying the impact of each release.  The indicator has posted sharp gains, posting a gain of 2.7% in Q2. The estimate for the  Q3 reading stands at 2.3%.
  5. CBI Realized Sales:  Wednesday, 11:00. This release has been steady, with two straight readings of 31 points. Another strong release is expected for November, with an estimate of 28 points.
  6. GfK Consumer Confidence: Friday, 00:05. The UK consumer remains slightly pessimistic according to this release. Last month’s reading came in at -2 points, and little change is expected in the upcoming release. Consumer confidence is an important indicator, as stronger confidence usually translates into increased consumer spending, which is a key engine of economic growth.
  7. Nationwide HPI: Friday, 7:00. This housing inflation indicator is an important gauge of activity in the housing sector. The indicator bounced back last month with a gain of 0.5%. Little change is  expected in the upcoming release.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD  opened the week at 1.5664  and touched a  low of 1.5586. The pair then touched a high of 1.5747 but retracted closing the week at 1.5627, just above support at 1.5625 (discussed last week).

Live chart of GBP/USD:

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Technical  lines from top to bottom

We start with resistance at 1.6131. This line has held since late October.

1.6006 is next. This line is just above the psychologically important 1.60 level. This is followed by 1.5909.

1.5746 faced strong pressure but held firm as the pair  showed some strength before retracting.  This line was an important support level in January 2013.

1.5625 continues to see action. It was tested as the pair dropped into 1.55 territory and starts the week just below where GDP/USD ended the week.

1.5539 has held firm since August 2013, but weakened during the  week. It could face pressure if the pound continues to lose ground.

1.5290 was a cushion in July 2013. It is the final support line for now.

I am  bearish on GBP/USD.

UK inflation has weakened, and another dovish BoE inflation report could push the pound lower. The US economy continues to post solid readings and the Fed is on course to tighten rates sometime in 2015.

US numbers remain strong, led by solid consumer spending and confidence numbers. The UK economy has slowed down, and weak inflation levels means that the BoE could delay an interest rate hike.

In our latest podcast, we talk about the state of US housing, run down the FOMC minutes, the Japanese jump, the Draghi drama and also talk oil:

Download it directly here.

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