GBP/USD Forecast Dec. 12-16

GBP/USD reversed directions last week, losing 110 points. The pair closed at 1.2560. It’s a busy week, with 13 events on the schedule. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.  

In the UK, Services PMI beat the estimate, but Manufacturing Production disappointed with a sharp decline. It was a good week in the US, as key economic indicators continue to impress. ISM Non-Manufacturing PMI beat expectations and UoM Consumer Sentiment jumped and easily beating the estimate.

Updates:

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

1. RIghtmove HPI: Monday, 00:01. This indicator provides a snapshot of the level of activity in the housing sector. The index posted a decline of 1.1% in November. Will we see an improvement in the December report?
2. CB Leading Index: Monday, 14:30. This index is based on 7 economic indicators, but is a minor event as most of the data has already been released. This minor indicator posted a weak gain of 0.1% in September, after two straight readings of 0.0%.
3. CPI: Tuesday, 9:30. CPI is the primary gauge of consumer inflation and should be treated as a market-mover. The index edged lower to 0.9% in October, shy of the forecast of 1.1%. The estimate for October stands at 1.1%.
4. PPI Input: Tuesday, 9:30. This inflation indicator surged 4.6% in October, crushing the estimate of 1.6%. The markets are braced for a decline of 0.4% in the November report.
5. RPI: Tuesday, 9:30. RPI includes housing costs, which are excluded from CPI. The indicator remained steady at 2.0% in October, short of the estimate of 2.3%. Little change is expected in the November report, with a forecast of 2.1%.
6. Average Earnings Index: Wednesday, 9:30. Wage growth is a key component of the labor market. The indicator has posted three straight gains of 2.3%, and an identical gain is expected in the October reading.
7. Claimant Count Change: Wednesday, 9:30. Claimant Change is one of the most important indicators and an unexpected reading can have a strong impact on GBP/USD. In October, the indicator jumped to 9.8 thousand, well above the estimate of 1.9 thousand. The estimate for November stands at 6.2 thousand. The unemployment rate is expected to remain at 4.8%.
8. Retail Sales: Thursday, 9:30. Retail Sales is the primary gauge of consumer spending. The indicator sparkled in October with a gain of 1.9%, well above the estimate of 0.5%. However, the markets are braced for a small gain of 0.2% in the November report.
9. Official Bank Rate: Thursday, 12:00. The BoE is expected to maintain rates at 0.25%. The MPC will release the vote breakdown for the November rate decision, when the bank held rates. The markets are predicting that the vote for that decision was a unanimous 9-0 vote.
10. Monetary Policy Summary: Thursday, 12:00. This summary is released on a monthly basis. This report contains discusses economic conditions and could provide clues about the BoE’s future monetary policy.
11. Asset Purchase Facility: Thursday, 12:00. The BoE’s asset-purchase program is expected to remain at 435 billion pounds. The voting breakdown for the November decision (which remained at 435 billion pounds) is expected to be a unanimous 9-0 vote.
12. CBI Industrial Order Expectations: Friday, 11:00. This indicator is surveys manufacturers for their expectations of order volume. The indicator continues to show expectations of decreasing volume, but the November reading of -3 points was much better than the previous release of -17 points. The forecast for December is -5 points.
13. BoE Quarterly Bulletin: Friday, 12:00. This report includes market research and analysis and commentary on domestic international economic issues.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.2669 and climbed to a high of 1.2775, as resistance held at 1.2778 (discussed last week). The pair then reversed directions and dropped to a low of 1.2540. GBP/USD closed the week at 1.2560.

Live chart of GBP/USD:

Technical lines from top to bottom

1.3121 was a cap in September.

1.2993 follows.

1.2860 has provided resistance since early October.

1.2778 held firm as the pair pushed higher before retracting.

1.2674 was a cap in November.

1.2512 is a weak support level.

1.2448 is next.

1.2311 has been a cushion since late November.

1.2201 is the final support line for now.

I am bearish on GBP/USD.

With the Fed likely to hike rates for the first time in a year this week, sentiment towards the greenback is favorable. This could translate into gains for the US dollar.