GBP/USD gained over two cents in mid-week, but gave up much of these gains by week’s end. The pair ended the week just above the key 1.60 level, at 1.6005. This week’s key event is Current Account. Here is an outlook of the events and an updated technical analysis for GBP/USD.
The pound posted very strong gains following the non-taper shocker from the Fed, but the dollar recovered much of those losses following strong releases last week. Unemployment Claims were solid, and housing and manufacturing releases looked sharp as well. In the UK, Retail Sales was a disappointment late in the week, posting a sharp decline.
GBP/USD graph with support and resistance lines on it. Click to enlarge: 
- External BOE MPC Member Ben Broadbent Speaks: Monday, 18:00. Broadbent will address the London School of Business. Analysts will be looking for hints regarding future monetary policy.
- BBA Mortgage Approvals: Tuesday, 8:30. BBA Mortgage Approvals provides a snapshot of the health of the UK housing sector. The indicator has been very steady, posting readings just above the 37 thousand level over the past two months. Both of these releases fell short of the estimate. The markets are expecting an improvement in the August release, with an estimate of 38.6 thousand.
- External BOE MPC Member David Miles Speaks: Tuesday, 10:30. Miles will address a university audience in Newcastle. Two other MPC members will be speaking at events in London – Paul Tucker and Charles Bean. If the MPC member’s speeches are more hawkish than expected, the pound could gain some ground.
- CBI Realized Sales: Wednesday, 10:00. CBI Realized Sales is an important consumer spending indicator. The index is based on a survey of retailers and wholesalers. In July, the index surged from 17 to 27 points, crushing the estimate of 19 points. This was the highest reading since last October. The markets are expecting a lower release in August, with an estimate of 24 points.
- Nationwide HPI: Thursday, 26th-30th. This housing inflation indicator is an important gauge of activity in the UK housing market. The indicator posted a solid gain of 0.6% last month, matching the forecast. Little change is expected in the August release, with an estimate of 0.5%.
- Current Account: Thursday, 8:30. Current Account is the key release of the week. The indicator continues to post large deficits, as the July release came in at -14.5 billion pounds, much higher than the estimate of -11.9 billion. The markets are expecting a turnaround for the August release, with a deficit estimated at -11.2 billion pounds.
- Final GDP: Thursday, 8:30. This is the third version of GDP, which is one of the most important economic indicators. Final GDP is released each quarter, and posted a gain of 0.3% in Q1, matching the forecast. The markets are expecting a much stronger reading in Q2, with an estimate of 0.7%. Will the indicator meet or beat this rosy prediction?
- GfK Consumer Confidence: Thursday, 23:05. Consumer Confidence has been steadily improving in recent readings and came in last month at -13 points, a multi-year high. The upwards trend is expected to continue, with an estimate standing at -10 points. The persistent readings below zero continue to reflect pessimism about the economy, although the releases are certainly pointing in the right direction.
- Index of Services: Friday, 8:30. Index of Services is released each quarter. It measures the change in the total GVA (Gross Value Added) of the private and government services sectors. The indicator posted a gain of 0.6% in July, slightly below the estimate of 0.7%. No change is expected in the August reading.
Live chart of GBP/USD: [do action=”tradingviews” pair=”GBPUSD” interval=”60″/]
GBP/USD Technical Analysis
GBP/USD opened the week at 1.5936. The pair dropped to a low of 1.5885 but it was all uphill after that. The pound climbed sharply, barreling past the 1.61 as it touched a high of 1.6163. GBP/USD closed the week at 1.6005, as support at 1.6000 (discussed last week) held firm.
Technical lines from top to bottom:
We begin with resistance at 1.6475. This line 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 has held firm since January, when the pound went on a sharp skid that saw it drop below the 1.50 level.
1.60, a key psychological barrier, is providing very weak 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. It was breached last week, GBP/USD closed the week just above this line. It is set to see more activity this week.
1.5936 saw a lot of activity in November 2012 and this past January. It began the week as a weak resistance line but has reverted to support role as the pound trades close to the 1.60 line.
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.
1.5550 continues to provide GBP/USD with strong support. This line saw action in mid-June, as GBP/USD pushed past this line and climbed as high as the mid-1.5750 range.
The final line for now is 1.5484. It was quite busy in August, when the pound started a rally that saw it climb above the 1.57 line.
I am neutral on GBP/USD.
The pound took advantage of the Fed’s non-taper announcement as the US dollar was broadly lower. Overshadowed by the Fed news were strong releases out of the US, and this bodes well for the dollar. QE tapering is just a matter of time, and this event is bullish for the dollar. At the same time, British releases have shown improvement, so there remains upward room for the pound.
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.
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