A volatile week ended with a disappointment – weak British growth. Now, the Pound expects a relatively light week, with a few housing figures standing out. Here’s an outlook for the British events and an updated technical analysis for GBP/USD, two weeks before the elections.
GBP/USD chart with support and resistance lines marked. Click to enlarge:
The past week saw rising inflation and later an improvement in jobs – all positive figures for the Pound – but the Pound is indirectly affected also by the Greek troubles and every economic indicator is interpreted in the context of the elections – a complication of the political situation isn’t Pound-positive. OK, let’s start:
- BBA Mortgage Approvals: Published on Tuesday at 8:30 GMT. The British Bankers Association accumulates data from its members – about two thirds of mortgages. This is a good gauge for the housing sector. After reaching a peak of 45,700 monthly approvals, they fell to the area of 35,000. This goes hand in hand with a pause in the rise of house prices. A rise to 39,300 is predicted now.
- CBI Realized Sales: Published on Tuesday at 10:00 GMT. The Confederation of British Industry has shown that retailers and wholesalers expect a higher volume of sales in the past two months. The positive score of 13 will probably be followed by a better one – 16. This tends to shake the Pound.
- Nationwide HPI: Published on Thursday at 6:00 GMT. Britain’s second earliest report on house prices showed that prices dipped by 0.8% two months ago, but then made a recovery. They’re now predicted to rise by 0.4%. The housing sector weighed on the whole economy during the crisis.
- GfK Consumer Confidence: Published on Thursday at 23:00 GMT (midnight UK). A week before the general elections, this consumer survey is expected to rise from -15 to -14. It probably reflects the situation quite well – improving but negative.
GBP/USD Technical Analysis
The Pound began the week with a big gap – it fell as low as 1.5195 before climbing back above the pivotal 1.5350 line, peaking at 1.5472 and closing at 1.5370, 10 pips higher than last week.
I’ve added a few lines on top of last week’s outlook. The current range for the Pound is 1.5350 to 1.5520 – which was a peak two weeks ago, and also worked as a support line in the past.
Looking up, the next line of resistance is very strong – 1.5833 – the failure to break this line sent the Pound down in recent months. Above, 1.6260 is a distant resistance line.
Below, 1.5195, the past week’s low provides immediate support. It’s followed by a stronger line at 1.5120 – a line that held the pair a few times in recent weeks.
Lower, 1.4975 is the next minor support line, and it’s followed by the year-to-date low of 1.4780 – also a support line in the past. A break of this line will lead the pair towards 1.44, but that’s too far now.
I remain neutral on GBP/USD.
Inflation and employment are on the rise, but the economy’s growth rate is too slow. Also politics contribute to the high volatility, but not to a choice of direction. We’ll probably see lots of action, but no long term moves till the elections.
Further reading:
- 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.
- For the kiwi, here’s the NZD/USD forecast.
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