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GBP/USD  continues to move higher and broke through the 1.61 line this week. The pair  closed the week at  1.6136. This week’s key events are  Manufacturing, Services and Construction PMIs.  Here is an outlook of the events and an updated technical analysis for GBP/USD.

The pound continues to shine, although this week’s UK numbers were uneventful. In the US, Unemployment Claims looked sharp, but key manufacturing and housing data disappointed the markets and weighed on the greenback.

GBP/USD graph with support and resistance lines on it. Click to enlarge:   GBP USD Outlook Sep. 30- Oct. 4th

  1. Net Lending to Individuals: Monday, 8:30. An increase in lending reflects stronger consumer confidence and spending. The July reading dropped to 1.5 billion pounds, falling short of the estimate of 1.7 billion. The estimate for August stands at 1.6 billion.
  2. Manufacturing PMI:  Tuesday, 8:30. This PMI has been steadily rising and the index has been above the 50-point level, indicating expansion, for the past four releases. Little change is expected in the upcoming release, with an estimate of 57.5 points.
  3. Halifax HPI:  Wednesday, 2nd-4th. This housing inflation indicator provides a snapshot of the health of the UK housing sector. The index dropped to 0.4% in July, falling short of the estimate of 0.7%. The forecast for the August release stands at 0.6%.
  4. Construction PMI:  Wednesday, 8:30. Construction PMI has been on a steady upward rise, and hit 59.1 points in the August reading. The markets expect the rise to continue, with an estimate of 60.1 points.
  5. Services PMI:  Thursday, 8:30. This index continues to look sharp, and has been above the 60-point line for the past three readings. The markets are not expecting much change in the September release, with an estimate of 60.4 points.
  6. 10-y Bond Auction: Thursday, Tentative. British 10-year bond yields have  been rising, and the previous average yield came in at 2.98%. If this week’s auction produces an average yield above 3.0%, it will be the first time we’ve seen this in over two years.

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

GBP/USD Technical Analysis

GBP/USD opened the week at 1.6016. The pair  dropped to  a low of  1.5955, as 1.5936 (discussed  last week) held firm. The  pair then rebounded sharply, crossing above 1.61 as it touched a high of 1.6147. GBP/USD  closed  the week  at 1.6136.

Technical lines from top to bottom:

We begin with resistance at 1.6694. This line saw some activity in June 2011, but has remained intact since then.

This is followed by 1.6475, which has held firm since August 2011. Next is 1.6343. This line was last breached when the pound dropped sharply in August 2011.

We next encounter resistance at 1.6247. This was a key resistance line in October and November 2012.

Next, 1.6125 had held firm since January, but  as breached this week as the pound continues to hammer away at the US dollar. It  starts the week as a weak support level, and could face  strong pressure early in the week.

1.60, a key psychological barrier, continues to provide support.  This line  had remained intact since mid-January, when the pound went on a sharp  slide that saw it fall below the 1.49 line. This line has some breathing room as the pair trades above the 1.61 line.

1.5936 saw  a lot of activity in  November  2012 and this past January.

1.5832 continues to provide the pair with support. It has some breathing room as GBP/USD trades at higher levels.

1.5752 was breached earlier in the month by the surging pound, and has strengthened as a support level.

1.5648 was an important resistance line since June, but as reverted to a support role since early September as the pound has rallied sharply against the retreating US dollar.

The final line for now is 1.5550, which  continues to  provide GBP/USD with strong support. This line last saw action in mid-June.

I  am  bullish on GBP/USD.

The pound enjoyed a super September, gaining about six cents against the retreating US dollar. Will the rally continue? UK PMIs have looked very sharp  over the past few months, and strong  releases this week could give the pound a boost.  The US could face a government shutdown this week as the Democrats and Republicans play political hardball, and how this event plays itself out could have a major impact on the currency markets.

Further reading: