After a strong surge last week, GBP/USD was unable to break out of range, and closed at 1.5858. The upcoming week is quite busy, with nine releases. Here is an outlook for the upcoming events, and an updated technical analysis for GBP/USD.
With the the debt crisis still weighing on various European countries, and a slow improvement in the US economy, the markets can’t seem to make up their mind about the British pound.
Updates: GBP/USD is trading at 1.5913. CBI Realized Sales surpised the markets, climbing out of negative territory to reach the zero level. Current Account improved to -8.5B, exactly as predicted by the markets. Final GDP plunged to -0.3%, after a previous reading of 0.6%. Revised Business Investment was down sharply to -3.3%, but easily beat the market forecast of -5.4%. Nationwide HPI dropped by 1.0%, its biggest drop in two years. Index of Services rose by 0.3%, a four-month high. M4 Money Supply shocked the markets by plummeting 1.9%, its worst reading in over six years. Mortgage Approvals dropped to 49K, a seven-month low. Net Lending to Individuals posted a figure of 1.6B, very close the market forecast.
BOE Quarterly Bulletin: Monday, 23:01. This quarterly release by the central bank provides important commentary about monetary policy and conditions. A report considered more hawkish than expected is bullish for the pound.
Nationwide HPI: publication time unknown. This important housing index measures inflation in the housing sector. The February reading jumped up 0.6%, and the markets are predicting a more modest increase of 0.3% in March.
CBI Realized Sales: Tuesday, 10:00. This diffusion index is based on a survey of retailers and wholesalers. The index was up to -2 in February, after a shocking reading 0f -22 the month before. The market forecast calls for another reading of -2. If the indicator can stay close to the zero level or push into positive territory, this would be bullish for the pound.
Current Account: Wednesday, 8:30. This indicator, released quarterly, measures the difference in value of exports, imports, and goods and services. The 2011 Q4 reading recorded a 15.2B deficit, the worst in over four years. The markets are forecasting better news this quarter, with a prediction of a deficit of 8.5B.
Final GDP: Wednesday, 8:30. GBP rose an impressive 0.6% last month, its best reading since December 2010. The market forecast calls for a contraction of 0.2% for this month. Will the indicator manage to stay in positive territory in March?
BOE Credit Conditions Survey: Thursday, 8:30. This report examines areas such as consumer spending and debt levels. A positive report can be bullish for the pound.
Net Lending to Individuals: Thursday, 8:30. The indicator shot up to 1.8B in February. The markets are predicting a slight drop this month, of 1.5B.
GfK Consumer Confidence: Thursday, 23:01. UK consumer confidence remains weak, with readings of -29 for the past two months. The market prediction for March is unchanged.
GBP/USD Technical Analysis
GBP/USD started the week at 1.5834. The pair dropped to a low of 1.5770, as the support level of 1.5750 (discussed last week). The pair climbed as high as 1.5923, but retracted, and ended the week at 1.5858.
Technical levels from top to bottom
We begin with the strong resistance level of 1.6356. This is followed by 1.6265. Next, 1.6132 has provided strong resistance since November 2011. Below, there is resistance at 1.6065. Next, there is strong resistance at 1.5987, just shy of the psychologically important line of 1.60. This is followed by the round number of 1.59, which is providing weak resistance. It was briefly breached by GBP/USD this week, and could be tested on an upward swing by the pair. Below, 1.5750, is providing important support, and held firm when the pair moved downwards this week. Next, 1.5639, has strengthened in a support role. This is followed by 1.5520, a strong support level since January. Below is the round number of 1.54, which has provided support to the pair going back to September 2011. The final support line for now is at 1.5336.
I remain neutral on GBP/USD.
GBP/USD, has been choppy recently, and the pair has had difficulty sustaining any breakouts. With numberous economic releases in UK this week, including Current Account and Final GDP, any unexpected readings could result in some increased movement by the pair.
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