GBP/USD Forecast Nov. 16-20 – Pound settles down after election euphoria

  


GBP/USD showed little movement last week, in contrast to the pound’s sharp gains a week earlier, courtesy of the US election. The upcoming week has five events, including inflation and retail sales. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

In the UK, employment numbers were stronger than expected. Wage growth jumped 1.3%, up from 0.0% beforehand. It was the strongest reading since March. Unemployment claims fell by 29.8 thousand, the first decline in four months. However, the unemployment rate rose from 4.5% to 4.8%. Apprehension over Brexit remains high, as it’s unclear if the sides will reach an agreement before the December 31st deadline.

In the US, consumer inflation softened, as the headline and core readings both fell to 0.0%, down from 0.2% beforehand. There was positive news on the employment front, as unemployment claims fell to 709 thousand, down from 751 thousand in the previous release. The week wrapped up with UoM Consumer Sentiment, which fell from 81.2 to 77.0, its lowest level in three months.

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

  1. Inflation Report: Wednesday, 7:00. CPI accelerated to 0.5% in September, up from 0.2% beforehand. The estimate for October stands at 0.5%. Core CPI jumped from 0.9% to 1.3% in September, matching the forecast. The forecast remains at 1.3%. 
  2. Inflation Report Hearings: Wednesday, Tentative. Bank of England Governor Andrew Bailey and several of his colleagues will appear before a committee in parliament to discuss the latest developments. They will have the opportunity to discuss future rate moves and also respond to the latest economic figures. Brexit, which is going down to the wire, will be a crucial topic in the hearings.
  3. CBI Industrial Order Expectations: Thursday, 11:00. The Confederation of British Industry index shows that manufacturers expect order volume to continue to decrease. The indicator came in -34 in October and is projected to fall to -39 in the November release.
  4.  GfK Consumer Confidence: Friday, 00:01. Consumer confidence remains mired in negative territory. The indicator fell to -31 in October and is projected to dip to -33 in the November release.
  5. Retail Sales: Friday, 7:00. Retail sales improved to 1.5% in September but is forecast to decline by 0.4% in October. A reading in negative territory could weigh on the pound.                                           

GBP/USD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3502, an important monthly line.

1.3340 is next.

1.3249 has held in resistance since early September.

1.3113 (mentioned last week) is the first line of support.

1.3040 remains relevant.

1.2903 is protecting the round number of 1.2900. It is the final support level for now.

I remain neutral on GBP/USD

The British pound has looked sharp lately, but the upswing was more a result of a huge selloff of US dollars rather than pound strength. It’s unclear if the Brexit talks are on the verge of failure or will an agreement be announced, possibly at the European Summit on Thursday. Any Brexit news could have a major impact on the pound.

Further reading:

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