GBP/USD Forecast November 3-7

The  British pound  softened last week, as GBP/USD lost about 100 points. The pair closed at 1.5984, the first time weekly close below 1.60 since September. The upcoming week is a busy one, led by PMIs and Manufacturing Production.  Here is an outlook on the major events moving the  pound and an updated technical analysis for GBP/USD.

In the US, the Fed ended its QE program,    an expected but still symbolic move. The Fed is generally pleased with the US economy, and   and a hawkish policy statement helped bolster the greenback. GDP  looked sharp, posting strong gains in Q3. British releases were uneventful and met  expectations last week.

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

 

1. Manufacturing PMI:  Monday, 9:30. The PMI has been losing ground in the second half of 2014, and slipped to 51.6 points last month. This was shy of the estimate of 52.6 points.   Little change is expected in the October reading.
2. Halifax HPI: Tuesday, 4th-7th. This housing inflation indicator improved to 0.6% last month,  easily beating the  estimate of 0.2%. The forecast for the upcoming release stands at 0.5%.
3. Construction PMI:  Tuesday, 9:30.  Construction PMI continues to point to strong expansion, with readings above the 60-point level throughout 2014. The September reading of 64.2 points was above the estimate of 63.7. However, the markets are expecting a slight drop in the October reading, with an estimate of 63.5 points.
4. BRC Shop Price Index:  Wednesday, 00:01.  This indicator measures inflation in BRC shops. The index continues to post declines, with a reading of 1.8% last month.
5. Services PMI: Wednesday, 9:30. Last month’s reading of 58.7 was a sharper drop than expected, as the estimate was 59.1 points. Little change is expected in the upcoming release, with the estimate standing at 58.5 points.
6. Manufacturing Production: Thursday, 9:30. This key event can have a significant impact on the direction of GBP/USD. The indicator slipped to 0.1% last month, compared to a 0.3% in the previous release. The markets are expecting a stronger release in October, with an estimate of 0.3%.
7. Official Bank Rate: Thursday, 12:00. The BoE is expected to leave the interest rate unchanged at 0.50% and the  asset-purchase facility  program at 375 billion pounds. While two members have  already voted for a rate hike, the rest of the MPC remains wary of hitting the recovery too early. As no statement is released when a change is not announced, the real drama awaits us in the meeting minutes later in  the month.
8. NIESR GDP Estimate: Thursday, 15:00. This indicator helps analysts track GDP on a monthly basis, as the official GDP release is published each quarter. The indicator has been steady, and posted a gain of 0.7% last month. The markets are expecting another gain in the upcoming reading.
9. Trade Balance: Friday, 9:30. This indicator is closely related to currency demand, as foreigners need pounds to buy British goods and services. The September trade deficit narrowed to GBP 9.1 billion, beating the estimate of GBP 9.6  billion. The estimate for the upcoming reading stands at GBP 9.4 billion.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD  opened the week at 1.6090 and showed strength, climbing to a high of 1.6182. The pair then reversed directions, breaking below support at 1.6006 (discussed  last week)  and touching a low of 1.5942. GBP closed the week  at 1.5984.

Live chart of GBP/USD:

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Technical  lines from top to bottom

We  begin with resistance at 1.6465, which was the bottom in March. Further below, the round number of 1.64 is providing resistance.

1.6310, the next resistance line, was a cushion during  January.

1.6250 continues to be a strong resistance line.

1.6131  was  tested as the pair showed strength early in the week before retracting.

1.6006 continues to see action. This line  was breached and has switched to a resistance role. It is a weak line and could face pressure early in the week.

1.5909 is  an immediate support role.  It has held firm since November 2013.

Next is 1.5746, which was an important support line in January 2013.

1.5628 has remained intact since September 2013.

The final support line for now is 1.5496.

 

I am  bearish on GBP/USD.

The US economy continues to expand at an impressive clip,  led by  a strong GDP and excellent consumer confidence numbers.  With the Fed giving the economy a thumbs up and concluding QE, the next move is a rate hike in 2015. The UK economy is showing some signs of slowing down, and the BoE is not in any rush to raise interest rates.

 

In our latest podcast, we  review  November’s big event and run down the recent ones:

Download it directly here.

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Further reading:

• For a broad view of all the week’s major events worldwide, read the  USD outlook.
• For EUR/USD, check out the  Euro to Dollar forecast.
• For the Japanese yen, read the  USD/JPY forecast.
• For GBP/USD (cable), look into the  British Pound forecast.
• For the Australian dollar (Aussie), check out the  AUD to USD forecast.
• USD/CAD (loonie), check out the  Canadian dollar.