The British pound rebounded against the dollar, climbing close to the 1.58 level, but gave up those gains by week’s end. The upcoming week is very quiet, with only two releases, both of which are housing sector indicators. Here is an outlook for the upcoming events, and an updated technical analysis for GBP/USD.
The British government deficit hit 15.2 billion in November, which although sharply higher than the October reading, was a bit better than the market forecast, and postive news for the pound.At the same time, property prices are down significantly, and most economic indicators are pointing to a recession in 2012.
Updates: Cable managed to move up early in the week, but then got stuck in a narrow range under 1.57.
GBP/USD graph with support and resistance lines on it. Click to enlarge:
- Nationwide HPI: Friday, 7:00. The HPI (Housing Price Index) is an important housing sector indicator. This index focuses on inflation in the UK housing market. The readings were identical for October and November, at 0.4%, with the market prediction in November of -0.1% well of the mark. This month’s forecast is for a slight increase to 0.4%. Will the index again confound the markets?
- Housing Equity Withdrawal : Friday, 9:30. This indicator, which measures the change in equity loans that are not used for home purchases, is released quarterly. The previous reading was -9.1B, the lowest level the indicator has registered in over four years. The market prediction was much higher, at -5.9B. Such a large discrepancy is important to traders because a reading that is lower than the market forecast is bullish for the pound. The forecast for this quarter calls for an improved reading of -7.3B.
* All times are GMT.
GBP/USD Technical Analysis
Pound/dollar started the week at 1.5517. After a brief drop to 1.5463, the pound rebounded nicely, climbing all the way to 1.5774, just shy of the 1.5780 resistance line (discussed last week). The pair then gave back most of these gains, closing the week at 1.5581.
Technical levels from top to bottom
We start with the resistance level of 1.61, which was tested in early November. 1.6045 is a line of weak resistance. Below, is the level of 1.59, which provided strong support in November, and is now acting as a resistance line. 1.5815 has proven to be a strong line of resistance. It is followed by, 1.5780, which was tested by the pair this week, and may be breached on any upward swing.
The round number of 1.57 is providing weak resistance, and has been breached several times in December. The next line is 1.5580, which is also a weak support level. This is followed by 1.5475, which is providing strong support. Below, are the levels of 1.5340 and 1.5270. The final support level for now is 1.5120.
I remain bearish on GBP/USD.
Economic indicators in the UK, such as consumer confidence, retail sales and property prices, are pointing sharply downwards, and the UK is likely headed for a recession in 2012. The outlook is much brighter in the US, and this has been reflected in recent gains by the US dollar against most major currencies.
- 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 the New Zealand dollar (kiwi), read the NZD forecast.
- For USD/CAD (loonie), check out the Canadian dollar.
- For the Swiss Franc, see the USD/CHF forecast.