GBP/USD Outlook – October 25-29

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The first release of GDP for Q3 is the highlight of a busy week in pound trading. Here’s an outlook for the British events, and an updated technical analysis for GBP/USD.

GBP/USD daily chart with support and resistance lines marked. Click to enlarge:

gbp to usd october 25-29

The pound suffered from the announcement of a big spending cut by the government and from more talks about quantitative easing. Will sterling continue downhill?

  1. BBA Mortgage Approvals: Monday, 8:30. The British Bankers’ Association represents about two thirds of mortgages approved in Britain, making this release important. Mortgages have already dropped from over 36K to 31.8K, and they’re expected to stay at the same levels now.
  2. Prelim GDP: Tuesday, 8:30. Any result will rock the pound. The British economy enjoyed an excellent second quarter, with a 1.2% growth rate. This was the third quarter of growth after the recession. It took the UK quite some time to start growing again. A weaker growth rate is expected in Q3 2010, as the world slowed down – 0.4%.
  3. Nationwide HPI: Thursday, 6:00. Contrary to some other house price reports, Nationwide showed volatility and not a steady fall in prices. After last month saw a surprising rise of 0.1% in prices, they are now expected to fall by 0.3%.
  4. CBI Realized Sales: Thursday, 10:00.  CBIs index has been positive in the past 3 months, rising rapidly. The positive number means higher sales volume for retailers and wholesalers. After it reached 49 points, it’s expected to drop to 44 points.
  5. GfK Consumer Confidence: Thursday, 23:00. 2000 consumers are surveyed for this important survey, that has shown ongoing pessimism for quite some time. After already reaching -18 points, another retreat was recorded last month with a drop to -20. Another deterioration is due now, with a drop to -22 points.
  6. Net Lending to Individuals: Friday, 8:30. Consumer credit is a good gauge for the mood of consumers and the direction of the economy. Lending rose to 1.5 billion pounds last month, and helped the pound. It’s now expected to squeeze back down to 0.9 billion.

GBP/USD Technical Analysis

The pound dropped to 1.5650 twice in the past week, making it a new support line (didn’t appear last week). A recovery attempt didn’t work out, and the pound lost over 300 pips in a terrible week.

The double bottom of the past week, 1.5650, serves as immediate and significant support. 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.

Looking up, stopped the pair in the past week and also provided support earlier this month, and now works as immediate resistance. Above, 1.5850 is the next minor line of resistance.

The 1.60 line continues to be a major and important resistance line. Above, a convincing break above 1.60 will find resistance once again at the 1.6080 a line that worked just now.

I remain bearish on GBP/USD.

The severe spending cuts added to the already negative sentiment that is fueled by weak employment and talks about more pound printing. Only a GDP of over 1% in Q3 can give a significant boost to cable, but there are better chances of contraction.

Further reading:

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

6 Comments

  1. The pound is goin to rubbish all technical analysis this week (25-29) and would break the resistance at 1.60 kiss 1.6085. Don’t doubt this.

  2. The pound is weak but the problem here is dollar also give a signal to more short.if dollar have a little correction/bullish,pound will go down..

  3. sir i am a newbie i trade on betonmarkets up/down how can you help me to know the mkt direction to avoid loses, i hav been loosing money here.thank you

  4. sir i am a new
    treader i want to know more when to buy&sell. and how to analysis the forex calendar.thanks sir.

  5. I do hope you are following the market trend. Bullish week as against all speculations.

    Tony and CeleDon can inbox me ([email protected]) for some prescriptions

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