GBP/USD showed some movement, but for the second straight week, the pair was unchanged at the close of the week, ending the trading week at 1.6152. Manufacturing, Services and Construction PMIs are the highlight of the week. Here is an outlook of the events and an updated technical analysis for GBP/USD.
The only UK release last week was within expectations, and US key data was mixed. There was no breakthrough in the fiscal cliff negotiations, and GBP/USD was unable to sustain a breakout in either direction.
Updates: UK releases started 2013 with gusto, as Manufacturing PMI, a key release, posted its best results since April. The index came in at 51.4 points, well above the estimate of 49.2. Construction PMI will be released on Thursday. The pound has moved higher following the fiscal cliff agreement. GBP/USD was trading at 1.6300. Nationwide HPI declined by 0.1%, lower than the estimate of a 0.1% gain. Construction PMI was a disappointment, dropping to 48.7 points. The estimate stood at 49.6. The BOE released its Credit Conditions Survey, which is issued each quarter. The pound continues to drop sharply, as GBP/USD was trading at 1.6147.
- Housing Equity Withdrawal: Monday, 9:30. This housing indicator continues to look very weak, and dropped sharply in the previous release to -9.8 billion pounds. The markets are expecting an improvement this month, with a forecast of -9.1B.
- Manufacturing PMI: Wednesday, 9:30. Manufacturing PMI has been below the 50.0 threshold since May, indicating ongoing contraction in the UK manufacturing sector. The markets are not anticipating any change in the January release.
- Nationwide HPI: Thursday, 7:00. This housing inflation index fell to 0.0% in December, slightly below the forecast of 0.2%. No significant change is expected this month, with an estimate of 0.1%.
- Halifax HPI: Thursday, 3rd-7th. Halifax HPI looked sharp in December, posting a 1.0% gain. This was the first foray into positive territory since July. The estimate for the January readings stands at 0.2%.
- Construction PMI: Thursday, 9:30. This PMI has been flirting with the 50.0 level in recent months. The December release came in at 49.3 points, and the upcoming reading is expected to be just under the 50.0 line.
- BOE Credit Conditions Survey: Thursday, 9:30. This report is published each quarter by the BOE. The survey includes data an analysis of secured and unsecured lending households and businesses, and provides and important snapshot of credit conditions in the UK.
- Services PMI: Friday, 9:30. This PMI has been above the 50 point line throughout 2012, but dropped to 50.2 points in December. A similar reading is expected in the January release.
- Net Lending to Individuals: Friday, 9:30. This consumer indicator was major disappointment in December, posting a decline of -0.3 billion. This was well below the market estimate of 0.9B. The markets are expecting a rebound in the upcoming release, with an estimate of a 0.4B gain.
*All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.6151. After touching a high of 1.6202, the pair fell to a low of 1.6014 before rebounding higher. GBP/USD closed the week unchanged at 1.6152, as the support level of 1.6122 (discussed last week) remained in place at the end of the week.
Technical lines from top to bottom:
We begin with resistance at 1.6747, which has not been tested since May. This is followed by resistance at the round number of 1.66. Below, is the line of 1.6475. This line has held firm since August 2011. This is followed by resistance at 1.6343. This line was last breached when the pound dropped sharply in August 2011. Next, the line of 1.6247 held firm, as the pair briefly crossed above the 1.62 line.
GBP/USD continues to receive support at 1.6122. This line was briefly breached as the pound slumped before regaining its footing. This line could see further activity this week. Next is 1.6060. Below, there is support at 1.5992, which has held firm since the end of November. This is followed by 1.5930. Next, there is strong support at 1.5850. This line has been solid since mid-November, when the pound began its rally against the greenback. This is followed by 1.5750, a strong support line which has not been tested since August. The final support line for now is at 1.5648.
I continue to be neutral on GBP/USD.
GBP/USD has been very quiet for the past two weeks, reflecting a holding pattern in the markets as we wrap up 2012. The focus continues to be on the fiscal cliff crisis in the US, as lawmakers in Washington make a last-ditch attempt to reach an agreement before January 1st. Since fiscal cliff could have enormous impact on the US economy, we could see some volatility from GBP/USD. A resolution of the crisis would be dollar negative, while failure to reach a deal could spook the markets and boost the dollar.
- 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.