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The  pound enjoyed another solid week, as GBP/USD  climbed about 150 points.  The pair  closed the week at 1.5258. This week has only three releases, highlighted by Preliminary GDP. Here is an outlook of the events and an updated technical analysis for GBP/USD.

The pound had a strong week, and took full advantage of an excellent British Claimant Change Count. The pound was able to post gains late in the week, shrugging off strong US employment and manufacturing data. Bernanke’s testimony before Congress didn’t have much impact on GBP/USD.

Updates:

GBP/USD graph with support and resistance lines on it. Click to enlarge:   GBP USD Forecast July 22-26

  1. BBA Mortgage Approvals: Tuesday, 8:30. This important housing release continues to improve, and rose to 36.1 thousand in the June reading. This easily surpassed the estimate of 33.1 thousand. The markets are expecting an even better release this time around, with the  estimate standing at 38.5 thousand.
  2. CBI Industrial Order Expectations: Wednesday, 10:00. This indicator continues to struggle deep in negative territory, indicating weak confidence from surveyed manufacturers.  However,  the most recent Manufacturing PMI looked strong, so perhaps the good news  will rub off on this indicator. The markets are expecting some improvement from last m0nth’s reading of -18 points. The July estimate stands at -12 points.
  3. Preliminary GDP: Thursday, 8:30.  Preliminary GDP is this week’s key release. GBP has three separate releases, and Preliminary GDP is the earliest and has the greatest impact. This indicator is released each quarter, magnifying its impact on the markets. Preliminary GDP bounced back nicely in Q1, posting a gain of 0.3%. This pleased the markets, which had expected a smaller gain of just 0.1%. The estimate for the July release stands at 0.6%. Will the indicator beat this prediction?

Live chart of GBP/USD:     [do action=”tradingviews” pair=”GBPUSD” interval=”60″/]

GBP/USD Technical Analysis

It was a busy week for the pair. GBP/USD opened the week at 1.5110. The pair  dropped to a low  of 1.5028 early in the week as the key line of 1.5000 (discussed last week) held  firm.  GBP/USD  then recovered and  shot up to  a high of 1.5282. GBP/USD  closed the week at 1.5258.

Technical lines from top to bottom:

With the pound continuing to post gains, we start at higher ground.

1.5752 is our first stop. This line was tested in June, but has remained intact since February. There is strong resistance at 1.5648. This line has held firm since mid-June, when the pound began a sharp downturn which saw it drop below the 1.49 line.

1.5550 is the next resistance line. This line saw action in early May and again in June. 1.5484  was busy  in mid-June, and continues to provide strong resistance.

1.5350 was a key resistance line in April.  This is followed by 1.5258, which  was briefly breached as the pound climbed. GBP/USD closed right  on this line last week.

GBP/USD is receiving support at 1.5196. The pair dropped close to this line, but was unable to dip below the 1.52 level. This line could face pressure if GBP/USD reverses direction.

Next is  1.5110. This line was   providing resistance earlier in July, but has reverted to a support role. It has strengthened as the pair has put together a nice rally over the past two weeks.

1.5000 is a critical  level, which continues to provide support. It  was under pressure as the pair lost ground early in the week, but held its ground. This is followed by support at 1.4897, which saw action early in July.

1.4781 is a strong support level. It  has remained intact since  June 2010.

The final support level for now is 1.4529.  This line last  saw activity in May and June of 2010.

I  am bearish  on GBP/USD.

The pound has been somewhat of a surprise lately. The British currency has shot up against the US dollar, gaining about four cents in the past two weeks. Will this impressive rally continue or run out of steam? Market sentiment is much more positive about the US economy than the British economy, and US releases have generally been better than the data out of the UK. After a strong rally by the pound against the dollar, the timing could be ripe for a correction.

Further reading: