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The British pound continued to impress, as GBP/USD  climbed another 130 pips,  closing the week at 1.6250. The upcoming week  has six  releases, including three key PMI releases. Here is an outlook for the upcoming events, and an updated technical analysis for GBP/USD.

GBP/USD moved higher this week, as the pound  continues to do  very well against the dollar in 2012.The pair  has benefited from some weak US economic data and the announcement by the Fed that it has no plans to raise interest rates for the foreseable future. As well , there has been some improvement in some economic indicators in the UK, such as  solid PMI readings   and higher consumer confidence.

Updates: GBP/USD was up sharply on Friday, following the release of    the disappointing  US GDP reading. The pair is trading at 1.62556.   The markets are waiting for the release of Manufacturing PMI, a key indicator, on Tuesday. Manufacturing PMI was slightly below the market forecast, coming in at 50.5 points. This marked the lowpoint for the index this year. The pound was down following this disappointing data, as GBP/USD is trading just above the 1.62 level, at 1.6206. Wednesday was a busy day in the UK, with four releases.   Construction PMI, a key indictor, posted a  reading of 55.8 points. This was slightly lower than the April reading, but above comfortably above the market forecast of 54.1. M4 Money Supply was a disappointment, coming in at -0.8%. Estimates stood at 0.4%. Mortgage Approvals came in at 50K, slightly above the market forecast of 48K. Net Lending to Individuals was also slightly below the market estimate  of 1.5B, recording a reading of 1.4B.  GBP/USD was trading below the 1.62 level, at 1.6181. Services PMI disappointed the markets, dropping to a five-month low. The market estimate stood at 54.4., but the index could only muster a reading of 53.3. HPI dropped by 0.2%. This weak reading caught the markets by surprise, as the  forecast called for  a 0.6% increase.

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

  1. Halifax HPI: Publication time tentative. This indicator of inflation in the housing sector hit 2.2% in April, its highest reading since June 2009. The market forecast for May calls for a more modest increase of 1.2%.
  2. Manufacturing PMI: Tuesday, 8:30. This index has now been slightly above the 50.0 level for three   consecutive months, indicating  very  modest  growth in the manufacturing sector. The market forecast calls for a reading of 51.4 in May.
  3. Construction PMI: Wednesday, 8:30. Construction PMI has been moving steadily upwards, reaching 56.7  in May. This was the best performance by the index since July 2010. However, the markets are predicting a  drop in May, with a forecast of 54.2.
  4. Net Lending to Individuals: Wednesday, 8:30.   The indicator posted a reading of 1.6B  in March, slightly above the market  forecast of  1.5B. The markets are predicting a slight improvement, with a rise to 1.7B.
  5. Nationwide HPI:  Thursday, 6:00.  This house indicator plunged last month,  declining by 1.0%. This marked the  lowest reading  in over two years. The markets are calling for an improved reading of 0.6% in May.
  6. Services PMI: Thursday, 8:30. The index has been close to the 55.0 level for most of 2012, indicating growth in the  servicess industry.  No  change is expected, as the  May  forecast is for 54.6.

*All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.6131. After dropping slightly to a low of 1.6076, the pair  climbed as high as 1.6280, briefly breaching  resistance at 1.6265  (discussed last week). The pair closed at 1.6249, as the pound continues to shine.

Technical levels from top to bottom

We begin with strong resistance at 1.6750, a line not tested since last August. Next,  there is resistance at  1.6617. Below, there is resistance at 1.6474. After falling below this level last summer, GBP/USD went on a sharp spiral downwards, which lasted until October 2011.

Next, 1.6356, is providing the pair with strong resistance.  If the spectacular rise  by the pound continues,  this line could be tested.  This is followed by 1.6265, which was  briefly breached this week by the pair, and now  is a line of weak  resistance.

The 1.6142 line now finds itself in a support role, after providing strong resistance  since last  October.  This is followed by the psychologically important line of 1.60, where  has been strengthening as  GBP/USD trades at  higher levels.  Next, 1.5930, which earlier in April was a fluid line, is now providing strong support for the pair.

Below, there is support at  1.5805, which also saw a lot  of movement in  April.    The final  support level for now is 1.5750, which has provided the pair with support since mid-March.

I remain bullish on GBP/USD.

GBP/USD continued its upward move this week, and is now trading in the mid-1.62 level. What’s next for the pound? With  some  improved economic indicators in the  UK and higher  inflation,  the central bank could soon discuss hiking interest rates rather than adding to QE, which would provide a boost the the pound.

Further reading: