GBP/USD Outlook July 29-August 2

The  pound continues to move upwards, as GBP/USD  climbed almost 100 points on the week.  The pair  closed the week at 1.5380. This week is quite busy, with 10 events on the calendar. Here is an outlook of the events and an updated technical analysis for GBP/USD.

The pound got a boost from British GDP, which posted a nice gain of 0.6%. As well, US employment and manufacturing data disappointed, hurting the US dollar.

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

1. Net Lending to Individuals: Monday, 8:30. This indicator is closely related to consumer spending and confidence, as a consumer who is optimistic about the economy is more apt take out a loan in order to make purchases. The indicator disappointed in the July reading, with a reading of 1.0 billion pounds, which fell short of the estimate of 1.4 billion. The markets are expecting a rebound in the upcoming reading, with an estimate  of 1.4 billion pounds.
2. CBI Realized Sales: Monday, 10:00. This important consumer spending release tends  to show a lot of  volatility. The indicator  bounced back from a terrible reading in May, and posted a reading of 1 point last month. The markets are expecting a sharp improvement this time around, with an estimate of 11 points. Will the indicator meet or beat this rosy prediction?
3. BRC Shop Price Index: Tuesday, 23:01.  This consumer inflation indicator includes those shops which are part of the BRC (British Retail Consortium). The index has posted two straight declines, and the markets are hoping to put an  end to this trend in the upcoming release.
4. GfK Consumer Confidence: Tuesday, 23:05. Consumer Confidence has been in the doldrums for quite some time, pointing to very weak consumer confidence in the UK economy. Little change is expected in the upcoming release.
5. Halifax HPI: Thursday, 1st-4th. This housing inflation indicator provides a snapshot of activity in the British housing industry. The index continues to post gains, and has surpassed the  estimates for the past three releases. The index gained a solid 0.6% last month, but the markets are expecting a weaker reading this time around, with an estimate of a 0.3% gain.
6. Manufacturing PMI: Thursday, 8:30. This key index has  been above 50 for the past two readings. The 50 level separates between expansion and contraction. In June, the PMI rose to 52.5 points, beating the estimate of 51.3. The markets are not expecting much change, with an estimate of 52.8 points.
7. Asset Purchase Facility: Thursday, 11:00. This will be Governor Mark Carney’s second policy meeting as head of the BOE. No change is expected to the asset purchase facility, which has been at 375 billion pounds since June of 2012.
8. Official Bank Rate: Thursday, 11:00. The Official Bank Rate has been pegged at 0.50% since early 2009, and the markets are not expecting the BOE to make any changes.
9. Nationwide HPI: Friday, 6:00. This will be the second housing inflation index release this week. The index came in at 0.3% last month, just shy of the estimate of 0.4%. The markets are expecting a slight gain in July, with an estimate of 0.4%.
10. Construction PMI: Friday, 8:30. This key release has showed steady improvement in 2013, and has been above the 50 level for the past two releases. The PMI posted a reading of 51.0 points last month, and   the markets are anticipating a similar reading, with an estimate of 51.6 points.

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

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5285. The pair  dropped to a low  of 1.5263, as the support line of 1.5258 (discussed last week) held firm. The pair then bounced back, climbing to  a high of 1.5434. GBP/USD  closed the week at 1.5380.

Technical lines from top to bottom:

1.5752 is providing strong resistance. This line was tested in June, but has remained intact since February.

1.5648 saw a lot of activity in June and continues to provide strong resistance.

1.5550 saw action in early May and again in June.

1.5484  was breached in June, as the pound went on  a sharp skid that saw it drop below the 1.49 line.

1.5350 was a key resistance line in April.  This is followed by 1.5258, which  held firm as GBP/USD dropped sharply.

1.5196 is providing support for the pair. This line has some breathing room as the pair ended the week at higher levels.

1.5110 was  providing resistance earlier in July, but continues to provide strong support.

1.5000 is a critical  support level. It  was under pressure a couple of weeks ago, but held its ground.

1.4897 saw action early in July, and was breached when GBP/USD began its present rally which has seen the pair climb as high as the mid-1.54 range.

1.4781 is  the final  support level for now. It  has remained intact since  June 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:

• 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.