GBP/USD Forecast Feb. 15-19 – Pound hits 33-mth high

  


GBP/USD enjoyed a good week, climbing close to 1 percent last week. The upcoming week has six releases, including GDP. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

British GDP reports were stronger than expected. The economy grew by 1.0% in Q4, better than the estimate of 0.5%. The monthly GDP rose 1.2%, beating the estimate of 1.0%. Still, the economy contracted by 9.9% in 2020, the sharpest annual contraction on record. Manufacturing Production expanded for an eighth consecutive month, but the December gain was a weak 0.3%.

In the US, inflation numbers were a bit lower than expected, and the US dollar’s response was muted. Headline inflation dipped from 0.4% to 0.3%, while Core CPI fell from 0.2% to 0.0%. Unemployment claims rose for the first time in four weeks, rising from 779 thousand to 793 thousand. The week wrapped up on a down note, as UoM Consumer Sentiment for January dropped from 79.2 to 76.2 points. It was the lowest level since July 2020.

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

  1. Inflation Report: Wednesday, 7:00. Headline inflation improved from 0.3% to 0.6% in December and another solid gain is expected in January, with a forecast of 0.5%. Core CPI rose from 1.1% to 1.4% in December. The estimate for January stands at 1.2%.
  2. GfK Consumer Confidence: Friday, 00:01. The index remains mired in negative territory, as the British consumer is pessimistic about the economy. The indicator came in at -28 in January and is expected to improve marginally in February, to -26 points.
  3. Retail Sales: Friday, 7:00. Retail sales posted a weak gain of 0.3% in December and analysts are bracing for a dismal January, with a forecast of -2.6%. A significant decline could weigh on the British pound.
  4. Services PMI: Friday, 9:30. Services fell sharply in December, from 49.9 to 38.8. A reading below the 50-level indicates contraction. The January forecast stands at 42.3.
  5. Manufacturing PMI: Friday, 9:30. Manufacturing remains in expansion mode but did fall to 52.9 in December. The street consensus for January is 53.1.
  6. CBI Industrial Order Expectations: Friday, 11:00. Order volume sank to -38 in January, down from -25 beforehand. The estimate for February is at -38.

GBP/USD Technical analysis

Technical lines from top to bottom:

We start with resistance at 1.4128, an important monthly line.

The round number of 1.4000 follows.

1.3917 has held since April 2018.

1.3808 is an immediate support line.

1.3687 has held since early February.

1.3514 (mentioned last week) is the final support level for now.

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I am neutral GBP/USD

The UK vaccine rollout is gathering steam, but Covid lockdowns are weighing on growth. In the US, the Biden stimulus package will likely weigh on the US dollar.

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