The meeting minutes from the last meeting of the BoE showed that there’s still one member voting for a rate hike. This helped GBP/USD bounce off the support line, after it got very close to it. Update on the Pound.

Andrew Sentance continues to vote for a rate hike. He’s still the only member out of 9 that wants a rate hike, but his voice is heard. The Pound leaped from 1.5545 to 1.5610 immediately after the release, and the move isn’t over:

Update: As of 9:45 GMT, GBP/USD already reached 1.5660! Very strong move.

A continued move could send the pair back to 1.5720, an area it failed to break yesterday. Above, 1.5833 and 1.60 are the next levels of resistance.

Earlier this week, British inflation continuing falling, slowly returning to the target range. CPI still stands on 3.1%, but Core CPI fell sharply to an annual rate of 2.6%. Mervyn King, the governor of the BoE, expressed “surprise” from the higher inflation, but remained certain that it will fall. He reiterated his stance that the high prices are mostly the result of higher taxes.

The Pound struggled after this release, but later fully digested the news and dropped from the vicinity of the 1.5720 resistance line all the way to the other end of the spectrum – the 1.5520 support line. It opened the London session with an attempt to break lower and pushed forward after the MPC Meeting Minutes.

A new move downwards, would send the pair first to support at 1.5520, and then to 1.5470 and 1.5350.

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British consumer prices are still above target. CPI dropped from 3.2% to 3.1%, exactly as expected. Other inflation related figures were softer than predicted, and the immediate reaction of the Pound was a small drop.

Core CPI unexpectedly dropped from 3.1% to 2.6%, showing that the higher inflation isn’t really strong. Also the RPI (Retail Price Index) which is often considered a good gauge for what consumers actually pay, dropped from 5% to 4.8%. All the figures are annualized. GBP/USD reacted with a dip:GBP/USD dropped by 30 pips after the release, from 1.5645 to 1.5615, but was quick to erase these losses. It’s currently enjoying a weaker dollar, so the fall is limited.

Earlier this week, GBP/USD managed to recover some of its gains and bounce of the strong support line of 1.5520. These gains were limited within the current trading range, that is capped at 1.5720.

A breakout on the upside will find resistance at 1.5833, which is now only a minor line of resistance, and then by the round psychological 1.6000 mark, which capped the pair before Bernanke’s move, and was the highest level in 6 months.

Below, 1.5470 that held the pair a few weeks ago now is the next immediate line of support. More significant support is found at 1.5350, and it’s followed by 1.5230.

The bears and bulls are struggling on the Pound, with no decisive winner. Tomorrow is a light day in the markets, but one important British event stands out – the MPC Meeting Minutes. It will be interesting to see if Andrew Sentance continues to be the sole member voting for a rate hike, or if someone else joined him in the last meeting.

Although Mervyn King returned to dismissing inflation and painting a grim view for the economy, more members concerned about inflation mean that he might have to change his mind. But as it seems now, this won’t be necessary.

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GBP/USD Technical Analysis

The MPC Meeting Minutes revealed that there’s still only one member, Andrew Sentance, who wants a rate hike. So, the rising inflation will continue to be disregarded. Without an upcoming rate hike, GBP/USD doesn’t have fuel to rise.

This sends GBP/USD down from 1.5330 to 1.5260. Andrew Sentance surprised with his vote last time, and created the impression that the rising inflation will force the BoE to raise the rates. He repeated this opinion in interviews that he gave in the past month. Nevertheless, Mervyn King, that disregarded rising inflation again and again, did it once again. Also the other members weren’t impressed.

British CPI is currently at an annual rate of 3.2%, above the government’s target range of 1-3% but already below the peak of 3.7% that it reached at the beginning of the year.

GBP/USD back to the range

The Pound broke out of a tight range last week, and made a move towards the all-important resistance line of 1.5520. It didn’t manage to end the week in these levels and fell back down below 1.5350, an important pivotal line.

Also now, 1.5350 caps the pair. Looking down, 1.5230 is minor line of support, and it’s followed by 1.5130 and then by 1.5050.

Earlier today, the Pound made a roller coaster move down from 1.52 to 1.5174 and back up all the way and even higher, in a time span of less than an hour.

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American and Canadian Trade Balance followed by German ZEW Economic Sentiment and UK’s CPI highlight today’s activities. Here is an outlook on the events at hand.

In the US, The trade deficit in the U.S. widened in April to $40.3 billion the highest in more than a year as exports and imports both declined. A drop to 39.4B is expected now.

More in the US, Federal Budget Balance expected to decrease deficit by 54.3B to -81.6B due to massive policy measures undertaken.

Finally in the US, IBD/TIPP Economic Optimism index predicted to rise to 47.9 points after an unexpected 46.2 point drop in May.

In Canada, Trade surplus expected to continue its growth to 0.4B from 0.2B in May.

For more on USD/CAD, read the Canadian dollar forecast.

In Europe, German ZEW Economic Sentiment Index could provide further evidence of an economic slowdown in the largest economy in the Euro-zone with a reading of 25.2 compared with 28.7 in the previous month. The ZEW index is poorly correlated to economic growth but is often seen as an important indicator of turning points in market sentiment.

More in Europe, French CPI expected to remain 0.1% and German Wholesale Price Index predicted to rise to 0.4% from 0.3% in May.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs’ latest analysis.

In Great Britain, Consumer Price Index, Inflation is expected to pull back to 3.2% y/y from 3.4% y/y in May, but still stubbornly remaining above the Bank of England’s 3.0% ceiling as well as Core CPI expected to drop to 2.7% from 2.9% in May.

More in Great Britain, Dr Andrew Sentance an external member of the monetary policy committee of the bank of England speaks at the Thames Valley Chamber of Commerce, in Reading. His comments may determine a short-term positive or negative trend.

Later in Great Britain, Nationwide’s consumer confidence index fell to 65 points in May, the lowest reading since June last year, from an upwardly revised reading of 75 in April. A further drop to 64 points is expected now.

Finally in Great Britain, Department for Communities and Local Government House Price Index measuring change in the selling price of homes expected to rise to 10.3% – 0.2% more than in May. Retail Price Index predicted to drop to 4.9% from 5.1% and CB Leading Index is likely to remain 0.6%.

Read more about the Pound in the GBP/USD forecast.

In Switzerland, producer price index, which measures the change in price of goods and raw materials purchased by manufacturers, rose 0.3% during May despite economists’ expectations for a flat index. A small drop to 0.2% is expected now.

Australia’s NAB business confidence survey fell to a reading of 5 in May from 13 in April, with the decline attributed to global financial market instability and sharp declines in the AUD and equity prices.  A further drop is expected now.

For more on the Aussie, read the AUD/USD forecast.

In New Zealand, Retail Sales,  Following a three month disappointment, a Rise of 0.6% is now foreseen and Retail sales also predicted to gain 0.6% after 0.2% dip in the previous month.

In Japan, Revised Industrial Production a leading indicator of economic health expected to remain -0.1%. Household Confidence predicted to drop to 42.4 points, 0.4 points less than in the previous month.

That’s it for today. Happy forex trading!

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GBP/USD is trading in an almost perfect range in the past week. The longer the range – the stronger the explosion, but in which direction? Here are some reasons for it to go down.

Last Friday, GBP/USD enjoyed the weak Non-Farm Payrolls in the US to rise to new levels. Since then, it has traded in an almost perfect range – from 1.5080 to 1.5240. This 160 pip range saw three tops and three bottom throughout the week, without breaking out. But the situation doesn’t look good for the Pound:

Recent economic data is mostly negative. British Services PMI disappointed with a drop to 54.4 points, worse than expected. Halifax HPI, which shows the change in house prices, fell by 0.6% instead of rising by the same scale. Manufacturing Production fell short of expectations as it rose by only 0.3%, and last month’s drop was revised – 0.8% instead of 0.8% – double.

But the biggest disappointment came from interest rate issues. First, the Bank of England didn’t raise the rates. While this was the consensus, this came after we saw that one member voted to raise the rates last month – Andrew Sentance’s vote came on rising inflation that missed the government’s target month by month.

The decision not to raise the rates was later backed with the PPI figures – producer prices dropped last month by 0.2% when expectations stood on a rise of 0.1%. So, maybe the inflationary pressures aren’t too strong?

Similar to the Euro, it seems that the British Pound mostly enjoyed the US dollar’s weakness rather than its own strength. A drop will find immediate support at 1.5050, followed by 1.4870 and 1.4780. A breakout to the upside will meet resistance at 1.5350, followed by 1.5530 and 1.5833.

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GBP/USD Technical Analysis

This rate decision was different in Britain – one member, Andrew Sentance, wants to address the rising inflation and to raise the rates. This is the first signal. GBP/USD reacts with a rise and aims to reach 1.50.

Andrew Sentance doesn’t disregard inflation like his boss Mervyn King. King, the governor of the Bank of England, blamed fuel prices for the rise of inflation above the 1-3% target. But Sentance wants a rate hike – the MPC Meeting Minutes revealed that he wants to lift the benchmark interest rate from 0.5% to 0.75%.

Sentance might be reacting to the call by the new Prime Minister. David Cameron called the central bank to tackle the rising inflation, and to get the CPI back to normal. Also George Osborne, his Chancellor of the Exchequer, reiterated the inflation.

Currently, Sentance is the only one. All the other members voted to leave the rates unchanged. But his vote made it clear that something was moving. A rate hike will boost the Pound, and even the initial talks about it already push it higher.

GBP/USD moved from 1.4850 to 1.4915 and the move continues. It’s getting close to this week’s high at 1.4937, which is the highest level in 6 weeks. The next minor line is the round number of 1.50, and it’s followed by a more serious resistance line at 1.5050.

A drop will be met by 1.4780, which turned from a strong resistance line to a support line, and its followed by 1.4610.

More lines + a chart can be seen in the British Pound forecast.

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Many American figures are due today, so lots of action is awaiting us. Will the dollar continue to weaken? Let’s see what’s up for today.

EUR/USD hasn’t broken the critical 1.3850 level. I still claim that the current rise is temporary before the fall. GBP/USD made it above the critical line of 1.5350, but has a hard time holding to its gains. OK, let’s start the review:

After the Bank of Japan introduces more easing measures, it will publish the BOJ Monthly Report which might provide more overview on the Japanese economy.

In Europe, the Current Account is expected to rise from 1.9 to 2.9 billion. While this is good news for the Euro, it will probably not take it over the top – over 1.3850. Later in Europe, Trade Balance is predicted to show a smaller surplus – 5.1 billion.

For more, read the EUR/USD forecast and Casey Stubbs’ latest analysis.

In Switzerland, quarterly industrial production is expected to rise by 5.1%, after a 3.4% rise last time. This will probably boost the Swissy. Later, the Swiss ZEW Economic Expectations figure is expected to stay around last month’s number – 52.5 points.

In Britain, Public Sector Net Borrowing is expected to jump from 4.3 to 14.6 billion, weighing on the Pound. Later, CBI Industrial Order Expectations are predicted to edge up from -36 to -33 points,

External BOE MPC Member Andrew Sentance will make a public appearance and could also move the Pound. For more, read the GBP/USD forecast.

Canadian Foreign Securities Purchases were better than expected in previous months, with over 11 billion last month. This shows confidence in the Canadian economy. They’re now predicted to drop to 7.75 billion.

The Canadian dollar is slowly getting closer to parity. For more on the loonie, read the USD/CAD forecast.

Many US figures

After producer prices fell and erased a significant portion of last month’s rises, consumer prices aren’t expected to pick up. Both CPI and Core CPI are expected to rise by 0.1% after small moves last month. A significant rise is necessary for a rate hike.

Unemployment Claims are dropping steadily since they reached a peak of 496K. Another drop, from 462K to 456K is predicted. The Philly Fed Manufacturing Index is now expected to remain unchanged at 17.6. Whatever number is printed, the markets will shake around this event as well.

Also in the US, Current Account will probably show a deficit of 120 billion, more than last month’s figure. The CB Leading Index is expected to rise by 0.1%, less than last month’s rise of 0.3%.

That’s it for today. Happy forex trading!

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The Pound enjoyed the dollar’s weakness to rise this week, but still under important resistance levels. The upcoming week consists of important employment figures among other events. Here’s an outlook for British events and an updated technical analysis for GBP/USD.

GBP/USD chart with support and resistance lines marked. Click to enlarge:

Mervyn King didn’t make public appearances this week. This could explain the Pound’s strength. We’ll get to hear him this week through the meeting minutes and through his colleagues. Let’s start the review. The technical analysis will follow:

1. Rightmove HPI: Published on Monday at midnight GMT. This is Britain’s first house price indicator, and it’s also released early in the week. After falling for a few months, this index showed an acceleration in prices, rising by 3.2% last month. A more modest rise is expected this time.
2. CB Leading Index: Published on Tuesday at 10:00 GMT. Most of this indicators components have already been released. Nevertheless, it can still move the Pound. The leading index slowed down last month, rising by only 0.4%. An insignificant rise is expected this time.
3. Employment data: Published on Wednesday at 9:30 GMT. After two months of drops in the number of unemployed people, we had a big rise last time – 23,500. This time, the Claimant Count Change is predicted to rise by 8,700 people, weighing on the Pound. This figure relates to February. At the same time, the Unemployment Rate for January will be released. Despite being a late figure, it’s highly quoted by the media and also shakes the Pound. A rise from 7.8% to 7.9% is expected.
4. MPC Meeting Minutes: Published on Wednesday at 9:30 GMT, together with employment figures. The last rate decision didn’t include any surprises – the interest rate and the Quantitative Easing program remained unchanged. Since Mervyn King didn’t rule out further money pumping  through the QE program, we’ll search for hints about this in the meeting minutes. In addition, hints for future policy will also be echoed in this release.
5. Public Sector Net Borrowing: Published on Thursday at 9:30 GMT. The British government borrows lots of money from the public. Last month, a drop in borrowing was expected, but it didn’t happen. This hurt the Pound. Also Fitch and the central bank voiced concerns about the debt. Borrowing is expected to rise from 4.3 to 14.5 billion this time, weighing on the Pound.
6. CBI Industrial Order Expectations: Published on Thursday at 11:00 GMT. The Confederation of British Industry surveys 550 manufacturers and has shown a curb in pessimism. The score is expected to rise from -36 to -34, still in the negative zone, reflecting expectations for lower sales volume.
7. Andrew Sentance talks: Starts talking on Thursday at 16:45 GMT, in a conference in London. Sentance is an external BOE MPC member. His past speeches had a significant impact on the Pound, and this will probably happen again.
8. Paul Tucker talks: He starts speaking on Friday at 10:35 GMT in a conference in Brussels. As deputy governor, Tucker is an influential person that accompanies Mervyn King in parliament appearances. Speaking on Friday, Tucker will probably move the Pound.

GBP/USD Technical Analysis

The Pound began the week with a small rise, reaching 1.52 before dipping down to 1.4870, a line that it dipped to last week as well. A slow recovery followed, and it touched 1.5220 before closing at 1.5202.

I’ve added the past week’s boundaries as new lines. They weren’t there last week. So, the current range is 1.4870 to 1.5220. The outer limits are stronger.

1.5350 is a strong resistance line. A break of this line two weeks ago signaled the Pound’s collapse. Looking down, 1.4780 is a strong line of support, serving as such in the collapse and also serving as such way back in the past.

Looking lower, 1.44 was a support line in May 2009, and is now the next significant support line after 1.4780.

Above, a break above 1.5350 will set 1.5833 as the next resistance line. There are many more above this line, but they are too far now.

I am bearish on GBP/USD.

The long term outlook continues to be negative. The British exit of recession is mostly due to a revision of Q3 data, and not real, convincing growth. The UK has yet to show economic strength before the Pound rises.

Further reading:

• For a broad view of all the week’s major event in all currencies, read the forex weekly outlook.
• For the Euro, read the EUR USD Forecast.
• For the Australian dollar, read the AUD/USD forecast.
• For USD/CAD, check out the Canadian dollar forecast.

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