Search ForexCrunch

GBP/USD broke out of its recent range trading, as the  pound gained over one cent against the dollar. The  pair closed  the week at  1.5806.  The upcoming week is  quiet, with only four releases.  Here is an outlook of the upcoming events, and an updated technical analysis for GBP/USD.

The pound took advantage of some weak US releases, including New Home Sales and employment numbers. As well, increased speculation about the  Fed introducing QE weighed on the dollar.

Updates: Nationwide HPI will tentatively be released on Wednesday. The markets are expecting a slight gain, following  a decline of 0.7% in the previous reading. The pound is choppy, as it trades close to the 1.58 line. GBP/USD was trading at 1.5790. Nationwide HPI has been rescheduled for release on Friday. The markets are waiting for three releases on Thursday. The  highlight is Net Lending to Individuals, where the markets are expecting a strong improvement from the July reading.  The pound has edged higher, as GBP/USD was trading at 1.5823. Net Lending to Individuals rose 0.9%, matching the market estimate. M4 Money Supply rebounded, posting a o.5% gain. This was slightly above the  forecast of 0.4%.  Mortgage Approvals edged upwards to 44 thousand, matching the market prediction. GfK Consumer Confidence will be released later on Thursday.

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

  1. Nationwide HPI: Tuesday, 28th-31st. After two straight  declines by the housing inflation index, this week’s  estimate stands at a modest 0.2% gain.
  2. Net Lending to Individuals: Thursday, 8:30. The indicator posted a modest gain in July of 0.3 billion pounds. The markets are expecting a much stronger August, with a forecast of 1.1B.
  3. GfK Consumer Confidence: Thursday, 23:01. This well-respected consumer indicator has posted three straight readings of -29 points. The markets are expecting a slight improvement in the August release.
  4. BOE MPC Member Adam Posen Speaks: Thursday, 17:10.  The MPC  voting member will be  addressing the Federal Reserve economic  meeting in Jackson Hole. A speech that is considered more hawkish than forecast is bullish for the dollar.

*All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5687, and  touched a low of 1.5678. The pair then pushed past the 1.59 line, hitting a high of 1.5912. GBP/USD then retraced, as the pair closed at 1.5806,  breaching the resistance line of 1.5805  (discussed last week).

Technical lines from top to bottom:

We  begin with resistance  at 1.6247. The next line of resistance is 1.6122, which has not been tested since May. Next, there is resistance at 1.6060. Below, is the line of 1.5992, protecting the important 1.60 level. This is followed by resistance at 1.5930. This line held firm as the pound briefly pushed above the 1.59 line before retracing.

The pair is receiving weak support just above the 1.58 line, at 1.5805. This line  was breached  this week after providing resistance since  late May. The next line of support is 1.5750, which was in a resistance role just last week.

Next is 1.5648, which has been tested frequently by the pair over the past several months. It  has  strengthened in support as the  GBP/USD trades at higher levels.  This is followed by support at the round figure of 1.5600. Next, there is support at 1.5521, which saw a lot of action in June and July.

Below, the pair is receiving support at 1.5415, which was last tested in mid-July. The next support level is at 1.5229. This  final line  for now is  1.5124, which has not been tested since July 2010.

I am neutral on GBP/USD.

GBP/USD has been marked by choppiness in July and August, and we could see this continue if economic data out of the UK and US  continues to be  sluggish. Increased speculation about QE intervention by the Fed has helped the pound, but weak global prospects could push nervous investors to the safety of the greenback.

Further reading: