GBP/USD Forecast Apr. 9-13 – Further choppy trading?

GBP/USD dropped to the lowest levels in two weeks only to recover and end the week higher. What is going on? Manufacturing output and a speech by Carney are up next. Here are the key events and an updated technical analysis for GBP/USD.

The British economy is slowing down according to the forward-looking PMI data. The construction sector is in contraction and the services sector, the most important one, is close to a standstill. In the US, job growth was disappointing at 103K but wages are rising at a faster pace. Fed officials seem determined to raise rates despite worries about trade wars that have been heating up between China and the US.

Updates:

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

  • Halifax HPI: Monday, 7:30. This is one of the most highly-regarded House Price Indices in the UK. HBOS reported a rise of 0.4% in February and the report for March is expected to show a more modest rise of 0.1%.
  • BRC Retail Sales Monitor: Monday, 23:01. The British Retail Consortium’s report on retail sales comes out before the official government one and provides some insight. A rise of 0.6% y/y has been seen in February and the report for March may show a more modest rise in sales.
  • Andy Haldane talks: Tuesday, 18:30. The Chief Economist of the Bank of England will speak in Melbourne and may comment about the economy. Haldane has been relatively dovish in his previous public comments.
  • Manufacturing Production: Wednesday, 8:30. Output in the manufacturing sector has been on the rise for quite some time but it disappointed in January with a minimal increase of 0.1%. A slightly faster pace is on the cards for February: 0.2%. The wider industrial output measure carries expectations for a rise of 0.5% after 1.3% beforehand.
  • Goods Trade Balance: Wednesday, 8:30. The UK reported a wider than expected trade deficit in January: no less than 12.3 billion pounds. A slightly narrower deficit is on the cards now: 11.9 billion. The deficit is larger since the EU Referendum.
  • Construction Output: Wednesday, 8:30. The construction PMI showed an outright contraction in the sector, and now we will get the hard data. After a sharp fall of 3.4%, a small rise of 0.8% is expected for February.
  • RICS House Price Balance: Wednesday, 23:01. The Royal Institution of Chartered Surveyors has shown a perfect balance between price increases and price decreases, worse than had been expected for February. A +1% level is projected now.
  • Ben Broadbent talks: Thursday, 6:30. The BOE Deputy Governor will speak in Sydney, at an event with the Reserve Bank of Australia. Broadbent has been one of the more hawkish members of the Monetary Policy Committee and he probably supports a rate hike in May.
  • BOE Credit Conditions Survey: Thursday, 8:30. This quarterly report by the BOE may show that credit expansion is growing at a fast pace due to low interest rates, thus justifying a hike to cool things down.
  • Mark Carney talks: Thursday, 19:00. The Governor of the Bank of England goes to his home country, Canada and speaks in Toronto. He will deliver closing remarks and may refrain from discussing monetary policy.
  • GBP/USD Technical Analysis

    Pound/dollar was under pressure early on, falling below 1.40. It then recovered swiftly, closing around the 1.4070 level discussed last week.

    Technical lines from top to bottom:

    1.4345 is the January 2018 swing high that is worth watching. 1.4280 was a top line in early February and it comes next.

    1/4260 was the high point in March and provides another line of defense. 1.4150 capped the pair in mid-February.

    1.41 capped the pair in early April and also in mid-March. It is followed by the round level of 1.40, which is eyed by many.

    1.3890 served as support in mid March and maintains its role. 1.3790 was a swing low in mid-March.

    1.3765 was the low point in early February. 1.3710 was a low point in early March.

    I am bearish on GBP/USD

    There are growing signs of a slowdown in the British economy while the Fed is keen on raising rates. This divergence may be expressed in a downfall. 

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    Further reading:

    • EUR/USD forecast – for everything related to the euro.
    • USD/JPY forecast – projections for dollar/yen
    • AUD/USD forecast – predictions for the Aussie dollar.
    • USD/CAD forecast – Canadian dollar analysis
    • Forex weekly forecast – Outlook for the major events of the week.

    Safe trading!


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