After posting weekly gains for four consecutive weeks, GBP/USD took a break and posted modest losses last week. The pair closed the week at 1.6347. This week’s key release is Manufacturing Production. Here is an outlook for the main events moving the pound, and an updated technical analysis for GBP/USD.
British PMIs were a mix last week, and there were no surprises from the BOE, which kept interest rates and QE levels steady. In the US, Unemployment Claims and Non-Farm Payrolls looked sharp.Updates:
- BOE Governor Mark Carney Speaks: Monday, 17:15. Carney will deliver remarks at the Economic Club in New York. With the BOE maintaining its QE and interest levels at last week’s meeting, analysts will be looking for clues as to the Bank’s future monetary policy.
- RICS House Price Balance: Tuesday, 00:01. This indicator is closely linked to housing inflation, and the indicator has been steadily increasing. The index hit 57% last month, and the markets are expecting the upward trend to continue, with an estimate of 59%.
- Manufacturing Production: Tuesday, 9:30. Manufacturing Production is the key event of the week. The indicator posted a gain of 1.2% last month, matching the forecast. The markets are expecting a downturn in the upcoming release, with an estimate of 0.4%.
- Trade Balance: Tuesday, 9:30. Trade Balance is closely linked to currency demand, as foreigners must purchase pounds to pay for British exports. The trade deficit rose to -9.8 billion pounds in October, higher than the estimate of -9.1 billion. The markets are expecting an improvement in the November release, with an estimate of -9.1 billion.
- NIESR GDP Estimate: Tuesday, 15:00. This indicator, which is released monthly, helps analysts track GDP, which is released every quarter. The indicator has been losing ground and dropped to 0.7% in October. Will the indicator reverse directions and move higher in the November release?
- External BOE MPC Member Martin Weale: Wednesday, 13:00. Weale will speak at an event in London. Analysts will be listening for clues as to the BOE’s future monetary policy.
- CB Leading Index: Thursday, 10:00. This release is issued annually. The statement looks at the economic outlook in the UK and previews the government’s budget for the coming year.
- BOE Chief Economist Spencer Dale Speaks: Friday, 12:30. Dale will speak at an event in Essex. Remarks that are more hawkish than expected are bullish for the pound.
* All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.6377. The pair climbed to a high of 1.6442, but then reversed directions and dropped to a low of 1.6291. The pair closed at 1.6347, as support at 1.6343 (discussed last week) remained intact.
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 has held firm since August 2011. This is followed by 1.6343, which was breached for a second straight week and begins the week in a support role. It is a very weak line and break 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 next. 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 has looked very strong, and held its own this week, despite excellent US employment numbers. The British economy continues to sail through smooth waters, which is good news for the pound. For its part, the dollar could get a boost as speculation increases about a December taper, thanks to strong employment numbers.
- 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.