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After very choppy trading, the pound faces a series of important indicators in the upcoming week. Here’s an outlook for the British events and an updated technical analysis for GBP/USD.

There are already three MPC members, including an internal BOE member that support rate hike. On the other hand, GDP was revised to the downside in Q4 2010, sending the pound down. Which force will win now?

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

GBP USD Chart Feb. 28 - Mar. 4

  1. Halifax HPI: Publication time unknown at the moment. The data published by HBOS is based on its wide internal mortgage figures, making this a very accurate figure. After a significant fall of 1.1% two months ago, a rise of 0.8% came last month and was a strong correction. Another small rise is expected now.
  2. Nationwide HPI: Tuesday, 7:00. Nationwide has shown different numbers, with more solid moves. A drop of 01.% followed a rise of 0.4% beforehand. A significant rise is expected in Britain’s second earliest house price index.
  3. Manufacturing PMI: Tuesday, 9:30. Purchasing managers in the manufacturing sector have shown very fast growth. The result was stunning last month – 62 points. This time, the number is expected to drop, but remain above 60. Any result will rock the pound.
  4. Net Lending to Individuals: Tuesday, 9:30. More lending by people means more economic activity. Last month was very disappointing, as the net figure was negative, -0.1%. Another squeeze is expected now, but unless there will be a sharp move, the result of the manufacturing PMI will have more impact.
  5. Inflation Report Hearings: Tuesday, 10:00.  Mervyn King, head of the BoE, will appear before the Treasury Committee in the British parliament. In the hearings, that take many hours, King will speak and will be questioned intensively about the pickup in inflation. Statements released in these hearings, will rock the pound. Note that King will probably be accompanied by more members of the BOE, perhaps someone that voted for a rate hike. This is a key event that will trigger choppy trading.
  6. Construction PMI: Wednesday, 9:30. Though usually playing second fiddle to the construction and services PMIs, the fall under 50 points two months ago, has drawn attention. After the correction to 53.7 points last month, a small drop is predicted now.
  7. Services PMI: Thursday, 9:30. The most important PMI closes the week. It also fell under 50 two months ago, and has also recovered. Another small rise is predicted after the recovery to 54.5 points last month. Any number will shake the currency.

GBP/USD Technical Analysis

After an attempt to reach the almighty 1.6280 line mentioned last week, GBP/USD dropped in a choppy manner and eventually closed at 1.6113.

Looking down, immediate support is found at 1.6110, although it is only minor support after being shattered once again.  It’s followed by 1.60 which proved to be a tough line of support. This round line was served as a peak back in August and dominated trading since then.

Lower, very minor support is found at 1.5910. It was a peak recently. It’s followed by 1.5820 which worked in both directions before the pair moved higher.

Further below we find 1.5720 which is already a stronger line, that worked in recent months.  Further below we have an important cushion – 1.5650. This was the top border of wide range that GBP/USD traded in the past few months.

Even lower, 1.5480, which is a minor line.  The next line is important – 1.5350. It was the bottom border or the wide range.  It hasn’t been broken for a long time.

Looking up, we have just witnessed the strong resistance of 1.6280, which capped the pair also earlier in the year, and was only temporarily breached in November. GBP/USD fell short of it just now.  Higher, an old peak at 1.6450 is the next line,

Further above, important resistance is found at 1.67 which prevented further moves back in 2009. In the distance, 1.7040, the peak of 2009 is the last stronghold.

I am bearish on GBP/USD.

Despite the growing call for a rate hike, we got a strong reminder that the British economy is still struggling. The failure to break higher despite the hawkish voices from the MPC serve as a bearish sign.

Further reading: