GBP/USD Forecast March 20-24

GBP/USD posted sharp gains last week, gaining 180 points. The pair closed at 1.2365. There are 11 events this week. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.  

The Federal Reserve raised rates last week, the first of several expected hikes this year. US CPI and Retail Sales were soft but met expectations. In the UK, the BoE held rates at 0.25%, but a dissenting vote in the rate decision helped send the pound downward.

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 strong gain of 2.0% in February.
2.  
3. CPI: Tuesday, 9:30. CPI is the most important inflation indicator and should be treated as a market-mover. The index continues to rise and came in at 1.8% in January, above the forecast of 1.4%. The upward swing is expected to continue, with an estimate of 1.9%.
4. PPI Input: Tuesday, 9:30. This indicator measures inflation in the manufacturing sector. The index posted a strong gain of 1.7% in January, above the forecast of 1.0%. The markets are braced for a weak gain of 0.2% in February.
5. Public Sector Net  Borrowing: Tuesday, 9:30. The indicator rebounded in January, posting a surplus of GBP 9.8 billion. Still, this fell short of the estimate of GBP 14.4 billion. The estimate for the February reading is a deficit of GBP 2.9 billion.
6. RPI Input: Tuesday, 9:30. RPI includes housing costs, which are excluded from CPI. In January, the index edged up to 2.6%, short of the forecast of 2.8%. The upward swing in expected to continue, with an estimate of 2.9%.
7. CBI Industrial Order Expectations: Tuesday, 11:00. The indicator continues to improve and gained 8 points in February. Will the upswing continue in the March report?
8. 30-y Bond Auction: Wednesday, Tentative. 30-year bonds dipped to 1.86% in February, down from 1.96% in the previous auction.
9. Retail Sales: Thursday, 9:30. Retail Sales is the primary gauge of consumer spending and should be treated as a market-mover. In January, the indicator declined 0.3%, missing expectations. The estimate for February stands at 0.4%.
10. CBI Realized Sales: Thursday, 11:00. The indicator rebounded in February, with an estimate of 9 points. The estimate for March stands at 4 points.
11. BBA Mortgage Approvals: Friday, 9:30. The indicator provides a snapshot of the strength of the housing sector. In January, the indicator rose to 44.7 thousand, above expectations. The forecast for the February report is 44.9 thousand.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.2398 and climbed to a high of 1.2399, It was all downhill from there, as the pair dropped to a low of 1.2129, breaking below support at 1.2218 (discussed last week). GBP/USD closed the week at 1.2165.

Live chart of GBP/USD:

Technical lines from top to bottom

We start with resistance at 1.2511.

1.2385 has strengthened in support.

1.2218 has switched to a resistance role following losses by GBP/USD last week.

1.2080 is an immediate support line. It is protecting the symbolic 1.20 level.

1.1943 marked the low point in October 2016.

1.1844 is the final support line for now.

I am bearish on GBP/USD.

The Federal Reserve pushed the rate trigger and more moves are expected this week. With the Bank of England maintaining a neutral policy regarding rate movement, monetary divergence continues to favor the greenback. The US economy continues to perform well, so sentiment for the US dollar remains strong.