The Pound ended the week with a strong tone at a critical technical spot. Where will it go? Here’s an outlook for this week’s British events and an updated technical analysis for GBP/USD.
GBP/USD chart with support and resistance lines marked on it. Click to enlarge:
The British Pound received good figures during the past week. This includes a better growth estimate, stronger manufacturing and rising house prices, and it made gains, unwanted by policymakers. As we draw closer to election day, the importance of opinion polls will rise for the Pound. OK, let’s start:
- CB Leading Index: Published on Monday at 9:00 GMT. This compound index is made out of 7 economic indicators, some already published. Last month saw a rise of 0.8% in this index, and now the rise is expected to be more mild.
- BRC Retail Sales Monitor: Published on Monday at 23:00 GMT (midnight UK). This indicator is very similar to the official retail sales figure, but is limited to a smaller number of retailers. After a drop of 0.7% two months ago, a rise of 2.2% last month was quite positive for the Pound. A small rise is expected this time.
- RICS House Price Balance: Published on Monday at 23:00 GMT, together with the sales figure. After reaching a peak 4 months ago, this indicator that compares areas of growth in contraction in Britain has dropped quite strongly – from 35% down to 17%. Another drop is predicted now.
- Trade Balance: Published on Tuesday at 9:30 GMT. Britain’s trade deficit jumped to 8 billion last month, weighing on the British Pound. We’re now expecting to see a bounce back to 7.3 billion, the figure seen two months ago.
- Nationwide Consumer Confidence: Published on Wednesday at 23:00 GMT. This survey of consumers was supposed to be released last week. The slow and steady advance in the Brits’ mood is expected to continue with a rise from 80 to 81 points this time.
GBP/USD Technical Analysis
The Pound traded in a range throughout most of the week – between 1.5110 and in a safe distance from 1.5350. On Friday, it made a swing move above 1.5350 and peaked at 1.5391, before closing at 1.5364. Most lines haven’t changed since last week’s outlook.
GBP/USD is now at a sensitive spot – at the critical resistance line. If this swing is confirmed to a real break, the next level above is 1.5534, which was a minor support line when the pair traded higher.
Stronger resistance awaits the pair at 1.5833, which worked as a support and resistance line in recent months. There are more resistance lines higher, but they are too far now.
If Friday’s swing was only temporary, a drop of the pair will find support at 1.5110, a line that worked as a resistance line and then a support line in the past few weeks.
Lower, 1.4780 is an important line of support – it was the pair’s year-to-date low, and also a support line in 2009. Even lower, a collapse of the Pound will stop at around 1.44.
I am bearish on GBP/USD.
The move around 1.5350 isn’t confirmed yet, and the uncertainty towards the general elections still looms over the pair.
- For a broad view of all the week’s major event in all currencies, read the forex weekly outlook.
- For the Euro, read the EUR USD Forecast.
- For the Australian dollar, read the AUD/USD forecast.
- For USD/CAD, check out the Canadian dollar forecast.
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