Cable won the crazy week, but remained under resistance. A wide variety of events awaits the British pound, with the inflation report being the highlight. Here’s an outlook for the British events, and an updated technical analysis for GBP/USD.
GBP/USD graph with support and resistance lines on it. Click to enlarge:
Apart from enjoying the American QE2 decision, the pound rose on a positive report form the services sector, although construction was quite worrying. Will it move higher this week, or retreat? Let’s start:
- BRC Retail Sales Monitor: Tuesday, midnight. This figure is a good gauge for the official retail sales release. The British Retail Consortium has shown a more modest rise in the volume of sales last month – 0.5%. A similar figure is expected now.
- RICS House Price Balance: Tuesday, midnight. House price indices are contradicting each other in the UK. This one, showing the balance between areas reporting rises in prices and areas reporting drops is drawing a bleak picture. The figure stood on -36% last month, and is now expected to drop to -39%.
- Manufacturing Production: Tuesday, 9:30. The release always rocks the pound. Manufacturing is 80% of industrial production and overshadows the latter figure. A stronger-than-expected rise of 0.3% was reported last month, and a similar rise is predicted now. Industrial output is likely to rise by 0.5%.
- Trade Balance: Tuesday, 9:30. The deficit in Britain’s trade balance is quite high as of last month – 8.2 billion. It’s now expected to squeeze down to 7.9 billion, helping the pound. The balance of trade is becoming more important with the currency wars.
- NIESR GDP Estimate: Tuesday, 14:00. This unofficial monthly estimation of GDP is highly regarded by analysts. The report for the three months ending in September (Q3) has shown a rise of only 0.3%, much lower than the official preliminary release of 0.8%. The three months ending in October are likely to have a growth rate of 0.5% according to NIESR.
- Nationwide Consumer Confidence: Wednesday, midnight.. This important survey by the Nationwide Building Society has show a deterioration in consumer confidence, with the figure dropping again to 53 points. A similar figure is expected now.
- BOE Inflation Report: Thursday, 10:30. The quarterly report by the Bank of England always rocks the pound. It includes not only a report about inflation, but also about employment and growth. The highlight of the event is the press conference that the governor of the BoE, Mervyn King, holds about the release. King is known to pound the pound. Watch out for high volatility during a long period around the release.
- CB Leading Index: Friday, 10:00. This composite index is made out of 7 indicators, that most of them have already been released. Nevertheless, it always shakes the exchange rate. After a weak rise of 0.1% last month, a stronger rise is expected now.
* All times are GMT.
GBP/USD Technical Analysis
The British pound found support above the 1.60 line mentioned last week. It then moved higher but couldn’t conquer 1.6280, and it closed at 1.6181.
Looking up, 1.6280 was a tough line this week, and also worked as such at the beginning of the year. The next line of resistance is found at 1.6450, which was a peak around the same time.
Even higher, the next significant resistance is at 1.6712 that capped the pair twice at the end of 2009. The last point is 1.7040, 2009’s high.
Looking down, 1.6107 was the peak a few weeks ago, and is now support. The round 1.60 line is still an important line, now of support. Below, 1.5923 is the next minor support line.
Below, 1.5850 served as a pivotal line several times in the past weeks’ choppy trading. It’s followed by 1.5750. Stronger support is found at 1.5650 which was a stubborn support line two weeks ago.
Below, 1.5530 capped the pair in April and worked as resistance not so long ago. Even lower, 1.5230 was a stubborn line of resistance back in July. It’s followed by 1.5120, that first served as resistance in June and then worked as support in July.
I remain neutral on GBP/USD.
British figures were quite mixed recently. For example, GDP was strong in Q3 according to the initial release, but it’s also based on strong construction, which proved to be rather weak. Mervyn King’s appearance will provide high volatility.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro/Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the New Zealand dollar (kiwi), read the NZD forecast.
- For USD/CAD (loonie), check out the Canadian dollar.
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