GBP/USD flexed some muscle during the week, but retracted and was almost unchanged, closing at 1.6328. The sole event this week is BBA Mortgage Approvals. Here is an outlook for the main events moving the pound, and an updated technical analysis for GBP/USD.
Sharp employment numbers out of the UK boosted the pound in mid-week, but it was not able to consolidate these gains. US releases had a rough week, notably Unemployment Claims, which rose for a second straight week.Updates:
- Dec 24, 13:04: A look into 2014: Ideas of the Year A look into 2014 for our last Daily Brief of the year. Our strongest conviction is...
- Dec 23, 14:36: A quiet week before the holidays: After last week’s taper-related turbulence, a quiet week beckons in the foreign exchange markets. With major holidays landing mid-week and...
- BBA Mortgage Approvals: Tuesday, 9:30. This indicator is an excellent gauge of demand and activity in the UK housing market, as most home buyers finance the purchase with a mortgage. The indicator has shown improvement in recent months, and the October release came in at 42.8 thousand. However, this fell short of the estimate of 45.2 thousand. The markets are expecting another strong reading for November, with an estimate of 44.5 thousand. Will the indicator meet or beat this rosy prediction?
* All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.6298. The pair dropped to a low of 1.6217, but then reversed directions and climbed all the way to 1.6485, breaking past resistance at 1.6475 (discussed last week). The pair then retracted, closing at 1.6328.
Live chart of GBP/USD:
Technical lines from top to bottom
We start with resistance at 1.6990, which is protecting the key 1.70 level. This line has remained intact since October 2008.
Next is resistance at 1.6705, which has held firm since May 2011. This is followed by the round number of 1.6600.
1.6475 was briefly breached for the first time since August 2011 as the pound shot upwards in mid-week, but remains as strong resistance.
This is followed by 1.6343, which was breached for a fourth straight week. It is a weak resistance line and could be tested early in the week.
1.6247 continues to provide the pair with support. This was a key resistance line in October and November 2012.
1.6125 is the next support level. This line has strengthened as GBP/USD trades at higher levels and has held steady since late November.
The round number of 1.60, a key psychological barrier, is providing strong support. Next is 1.5893 which saw action in November.
1.5752 is the final support line for now. It was breached in mid-September by the surging pound but has provided solid support since then.
I am neutral on GBP/USD.
The pound continues to look strong as the British economy picks up steam. November’s employment, GDP and retail sales numbers all were positive. US releases were disappointing last week, but the Fed finally announced a QE taper and this will likely help strengthen the US dollar.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
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- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.