The swings continue for GBP/USD, as the pair reversed directions and lost ground last week. There are five events in the upcoming week. Here is an outlook for the highlights of the upcoming week and an updated technical analysis for GBP/USD.
British data was soft last week, and the pound responded with losses. The U.K. budget deficit ballooned to 10.5 billion in October, well above the estimate of GBP 8.5 billion. This was the highest deficit since November 2016. The manufacturing and services PMIs both slipped into contraction territory, with readings of 48.3 and 48.6, respectively.
Over in the U.S., policymakers said that the Fed would take a break from recent rate cuts unless there was a significant change in economic conditions. The rate cut in October was considered hawkish, as the Fed took pains to reassure investors that the U.S. economy was in good shape, despite the rate cut. The minutes noted that U.S. economic conditions were generally positive, with an outlook of moderate growth, a robust labor market and inflation close to the Fed’s target of 2 percent.
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- CBI Realized Sales: Monday, 11:00. Sales volume continue to drop, but the declines have been easing since the brutal release of -49 pts in August. In October, the indicator came in at -10 pts and another reading of -10 pts is expected in November.
- High Street Lending: Tuesday, 9:30. The number of new mortgages approved by major British banks dipped to 42.3 thousand in September, just above the estimate of 42.2 thousand. The estimate for October stands at 43.1 thousand.
- BRC Shop Price Index: Wednesday, 0:01. This consumer inflation indicator has been sputtering, with five straight declines. The indicator came in at -0.4% in September and we will now receive the October data.
- GfK Consumer Confidence: Friday, 0:01. The British consumer remains pessimistic about economic conditions, and the index sagged in October, falling to -14 pts. The indicator is expected to remain at -14 pts.
- Net Lending to Individuals: Friday, 9:30. Credit levels dipped in September, with a reading of GBP 4.6 billion, matching the estimate. The downward trend is expected to continue in October, with an estimate of GBP 4.5 billion.
GBP/USD Technical analysis
Technical lines from top to bottom:
We start with resistance at 1.3217. Close by, there is resistance at 1.3170.
1.3070 was a high point in November 2018.
The round number of 1.3000 has held since mid-October.
1.2910 remains relevant.
1.2850 has switched to a resistance role after losses by GBP/USD last week. It is a weak line.
1.2728 has held in support since mid-October.
1.2616 (mentioned last week) is next.
1.2535 is the final support level for now.
I am bearish on GBP/USD
The British election is just a few weeks away, and Brexit will have to be dealt with as soon as a new government is in place. The uncertainty is certainly not bullish for the pound, which will have trouble attracting investors.