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The British pound had another week of suffering. Where will it find a bottom? The upcoming week leans towards housing indicators. Here is an outlook for the British events, and an updated technical analysis for GBP/USD.

Britain is getting closer to another round of QE, perhaps as early as next month. This is what was seen in the meeting minutes, and it hurt the pound. On the same day, Ben Bernanke didn’t provide any hints whatsoever for QE3 and settled for Operation Twist. This was a huge blow for the pound.

GBP/USD graph with support and resistance lines on it. Click to enlarge:GBP/USD Chart September 26 30 2011

  1. Nationwide HPI: Publication time unknown at the moment. This house price index always has a strong impact on the pound. After a few months of small changes, Nationwide reported a relatively big drop of 0.6% in prices of homes. This hurt the pound. Another drop, though smaller, is likely now.
  2. CBI Realized Sales: Tuesday, 10:00.  The  Confederation of British Industry reported three consecutive months of lower sales volume with retailers and wholesalers – this is seen in negative numbers. A rise from last month’s -14 is expected now, but the number will likely remain negative.
  3. BOE Credit Conditions Survey: Wednesday, 8:30. This quarterly survey examines the situation of credit at all levels of the economy. Recent credit conditions have deteriorated, and this will likely be reflected in this official report.
  4. Net Lending to Individuals: Thursday, 8:30. Following the previous indicator, lending to individuals has been lower than expected in the past two months, indicating less economic activity and paving the way for QE2 in Britain. A similar number to last month’s 0.9 billion is expected now.
  5. Mortgage Approvals: Thursday, 8:30. Though slightly overshadowed by the previous figure, this official housing sector number is important. Approvals have been stable between 45K to 49K lately. A small drop from last month’s 49k is expected now.
  6. GfK Consumer Confidence: Thursday, 23:00. The flow of economic indicators ends with a survey of 2300 consumers. According to GfK, pessimism rules. The score fell from -30 to -31 last month, and is likely to tick even lower now.

* All times are GMT.

GBP/USD Technical Analysis

Pound/dollar began the week with a gap below the 1.5780 line, and couldn’t recover from there. After some struggle with the 1.5650 line (mentioned last week) the pair made a free fall and stabilized only around the 1.5350 line.

Technical levels from top to bottom

We begin with a lower line this time. 1.5910, which was a peak many months ago, gave a fight, but was eventually broken and is distinct line separating ranges. Any recovery attempt will meet fierce resistance here.  1.5823, which worked as stubborn support early in the year is now minor resistance.

It is closely followed by the swing low of 1.5780, a  minor resistance in 2010, which is high resistance now. 1.5706 was a previous low and is minor support.

1.5650 was a clear line separating ranges at the beginning of the year and provided its high importance just now. 1.5550 is the next line below after providing support back in December, and is only minor.

1.5480 has a minor role as support after working as resistance a long time ago. It now worked as distinct resistance for the recovery attempt.

1.5350 was the last line last week and it eventually provided some support, despite attempts to break lower. Below, 1.5295 was a swing low at around September 2010 and is now weak support.

1.5240, which capped the pair quite stubbornly in August 2010 is stronger support. Lower, 1.5120 was a stepping stone for the pound on the way up. The last line is very round 1.50.

I remain bearish on GBP/USD.

The lack of a big move by the Federal Reserve and the progress of the MPC towards more QE in the UK make room for more falls in GBP/USD. The crisis in Europe adds to the weight on the pound. Also GBP/JPY is vulnerable after hitting record lows.

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