GBP/USD Outlook April 15-19

The British pound  had a fairly quiet week, and was almost unchanged at the end of the week, closing at 1.5341. This week’s highlights include CPI, Claimant Change and Retail Sales.  Here is an outlook of the events and an updated technical analysis for GBP/USD.

British data was mixed, and the pound had little to show for the week. Manufacturing Production was up nicely, but the trade deficit widened, and NIESR GDP Estimate posted a negligible gain.

Updates: Rightmove HPI gained a healthy 2.1%. UK Inflation numbers were within market expectations, for the most part. CPI gained 2.8%, matching the forecast. The gain was identical to the previous release. PPI Input declined 0.1%, beating the forecast of -0.3%. RPI climbed 3.3%, matching the estimate. Core CPI rose 2.4%, edging out the estimate of 2.3%. HPI climbed 1.9%, well short of the estimate of 2.8%. PPI Output rose 0.3%, as expected. GBP/USD is steady, as the pair was trading at 1.5318. Claimant Count Change looked sharp, posting a decline of 7.0 thousand. The estimate stood at 0.0K. However, the Unemployment Rate rose from 7.7% to 7.9%. The MPC meeting minutes were released, and showed that 3 of the 9 members, including BOE Governor King, favored increasing QE. The vote was unanimous to maintain interest rates at 0.50%. Average Earnings Index gained 0.8%, well off the estimate of 1.4%. Retail Sales,  a key release, declined 0.7%, matching the forecast. British 30-year bonds rose slightly to 3.12%, up from 2.95% at  the previous auction. GBP/USD is steady, as the pair was trading at 1.5272.

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

1. Rightmove HPI:  Sunday, 23:01. This week’s releases start on Sunday, with the Rightmove House Price Index. The index fell in March, but still recorded a respectable 1.7% increase. The markets will be hoping for another gain in the April release.
2. CPI: Tuesday, 8:30. CPI is the most important inflation indicator, and is often a market-mover. The index has been very steady in recent readings, and posted a gain of 2.8% last month. No change is anticipated in the upcoming reading.
3. PPI Input: Tuesday, 8:30.PPI Input is another important inflation indicator, and measures the prices paid by manufacturers for goods and raw materials. The index was up sharply in March, rising 3.2%. The markets are expecting a much weaker April release, with a forecast of a 0.3% decline.
4. RPI: Tuesday, 8:30. RPI has been steady in recent readings, and posted a gain of 3.2% last month. The markets are anticipating a slightly rise, to 3.3%.
5. Claimant Count Change: Wednesday, 8:30. One of the most important economic indicators, Claimant Count Change is eagerly awaited by analysts. The indicator has reeled off four straight declines, although in March, the loss was a modest 1.5 thousand, which was below the estimate. The forecast for the April reading stands at 0.0K. If the indicator can push into positive territory, we could see the pound move higher. The Unemployment Rate will also be released at the same time. The rate has been stuck at 7.8% for the past two readings, and is expected to remain at this level in the April release.
6. MPC Meeting Minutes: Wednesday, 8:30. These minutes are always of interest, as they provide a breakdown of the vote for the interest rate and  asset  purchase  decisions. The latter have been especially important, as there has been a split in the vote in recent meetings.
7. Retail Sales: This is a key consumer indicator, and an unexpected reading can affect the movement of GBP/USD. Retail Sales was outstanding in March, jumping 2.1%, its  best showing in three years. The markets are bracing for a decline in April, with a forecast of -0.3%. Will the indicator surprise the markets and stay in positive territory?
8. 30-year Bond Auction:  Tentative. British 30-year bonds fetched a yield of 2.95% at the last auction, which was in September 2012. The yield is a good measure of investor confidence in the UK economy, but is unlikely to have much effect on the value of the pound.

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5349. The pair  dropped to a low of 1.5263,  as the support line of 1.5258 (discussed last week) held firm. The pair then moved higher, crossing above the 1.54 line and reaching 1.5412. The pair then retracted, and  GBP/USD closed the week at 1.5341.

Technical lines from top to bottom:

We  begin with resistance at    1.5827. This is followed by 1.5750. This resistance line saw a lot of activity in the first half of February, before the pound began a dive which lasted until mid-March. This is followed by resistance at 1.5648. Below, there is resistance at 1.5567. This  line has remained in place since mid-February. This is followed by resistance at 1.5484. Next, there is resistance at 1.5406. This line was breached as the pair briefly pushed across the 1.54 line before retracting.

GBP/USD is receiving support at 1.5258.  This level held firm as the pair lost ground early in the week. Next is  a support level at 1.5189.  Below, there  is support at 1.5061. This is followed by 1.5010, protecting the all important 1.50 level. We next encounter support at 1.4896, just below the round number of 1.49. Below this is  support at  1.4765, which has remained intact since June 2010. The finals support level for now is at 1.4665.

I remain bearish on GBP/USD.

Although British  manufacturing  numbers looked sharp and  US data continues to look miserable,  the pound  failed to post gains last week.  The markets remain  downbeat about  the UK economy, and this  is likely  to continue to weigh on the pound. Much will  depend on  this week’s UK employment numbers.

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 the Australian dollar (Aussie), check out the AUD to USD forecast.
• For USD/CAD (loonie), check out the Canadian dollar forecast.