GBP/USD Outlook May 27-31

The pound  showed some movement in both directions, but ended the week with very modest losses, as GBP/USD closed at 1.5122. The upcoming week is very quiet, with just four releases on the schedule. Here is an outlook of the events and an updated technical analysis for GBP/USD.

British inflation numbers, including CPI, missed  their estimates, and  Retail Sales looked awful.  GDP salvaged the week,  gaining 0.3%, which matched the forecast.

Updates:

• The UK markets were closed for a holiday on Monday, and the there is only one release on Tuesday, as BOE Deputy Governor Paul Tucker speaks at an event in London. CBI Realized Sales  will be released on Wednesday. GBP/USD is steady, as the pair trades at 1.5117.
• GBP/USD is sliding lower on a    a better than expected consumer confidence number in the US.  The 5 year high in confidence  is sending cable closer to 1.50. It trades around 1.5050.
• Dollar plunges in violent correction, and cable runs above 1.51. Once again, 1.50 has been avoided.
• Roller coaster: A worried market mood sent cable down to 1.5120. But then,  US GDP and jobless claims disappointed,  and helped the pair recover.  Another disappointment from pending home sales  already sent pair to a successful break of 1.52.
• Holding on: Despite relatively wild flows on the last day of the week and the last day of the month, GBP/USD is holding on to the 1.52 level and even gaining ground. 1.5225 is the current level.
• Cable ends the week at 1.5193. While below the 1.52 line, (due to a resumption of USD strength)the British pound was an island of (relative stability within the storm. An updated GBP forecast will be released on Sunday.

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

1. CBI Realized Sales: Wednesday, 10:00. CBI Realized Sales is an important leading indicator of consumer spending. The indicator has slid   badly in 2013, and dropped to -1 point in the April reading. This was its lowest reading since August 2012. The markets will be hoping that the indicator can climb back into positive territory in the upcoming reading.
2. Nationwide  HPI:  Thursday, 6:00. The UK housing market continues to struggle. This housing inflation indicator declined 0.1% in the May release, matching its lowest level in 2013. Will the indicator surprise the markets   with a strong reading this time around?
3. GfK Consumer Confidence: Thursday, 23:01. Consumer confidence is vital for the economy, as a confident  consumer means a spending consumer. The indicator has been mired in deep negative territory, indicative of deep pessimism in consumer confidence. The indicator came in at -27 points in the previous reading, and little change is expected in the upcoming release.
4. Net Lending to Individuals: Friday, 8:30. This indicator provides a snapshot of consumer confidence and spending, as consumers will increase their borrowing if they are comfortable in spending more. The indicator dropped sharply to 0.9 billion pounds in April, which matched the forecast. The markets will be hoping for better news from the May release.

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5175. The pair  touched a high of 1.5281, but was unable to maintain this move. The pair dropped as low as 1.5092,  but the support line of 1.5061 (discussed last week) held firm. GBP/USD closed the week at  1.5122.

Technical lines from top to bottom:

We start with strong resistance at 1.5648.  This line has  held firm since mid-February. We next encounter resistance at 1.5560. This line was providing support  at the start of the month, but fell as the GBP/USD went on a sharp slide which continues. Next there is  resistance at  1.5484. This is followed by 1.5416. This line was providing support, but the pair broke through early last week. We next encounter support at 1.5258. This line was active last week, and has strengthened in resistance as the pair trades at lower levels. Next, 1.5189 is providing weak resistance. It could see more action early this week.

GBP/USD  continues to receive support at 1.5061. This line held firm as the pair pushed downwards and broke through the 1.51 line.  This is followed by 1.5010, protecting the all important 1.50 level.  Below is 1.4896, just below the round number of 1.49. It has held  fast since mid-March. The final support line for now is 1.4648, which was last tested in June 2010.

I  remain bearish on the  GBP/USD.

Although the pound had a decent week, it has lost about four cents against the US dollar in May, and the  British economy  continues to look weak.  The pair tested the 1.51 line , and their is more room for the pair   to fall.

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.