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British Pound - U.S. Dollar: The Bullish Sentiments May Not Last Long

During last week GBP/USD briefly went as low as 1.5992 but then could not sustain below 1.6000 psychological support and the currency pair jumped to 1.6179 before closing for the week at 1.6132.

The recent economic releases reflect a neutral outlook for the currency pair. The economic data from the last week has been as follows:

Economic release form U.K.

U.K.: Goods Trade Balance: GBP -9.164B and though less than the consensus of GBP -9.050B but better than the previous -9.487B British Pound.

U.K.: Interest rate was kept same at 0.5%.

U.K.: BoE Asset purchase facility was kept same at GBP 375B.

U.K.: Industrial Production: Year on year change -2.4% and though less than the expected -1.9% but better than the previous -3.0%. Same with the month on month change of 0.3% against the consensus of 0.8% and previous release of -0.9%.

U.K.: Manufacturing Production: Year on year change -2.1%, negative as compared to the forecasts (-1.3%) as well as the previous -2.0%. Month on month change was -0.3% and though less than the forecasts of 0.5% but was better than the previous release of -1.3%.

U.K.: NIESR GDP Estimate (3 months): -0.3% against the previous 0.1%.

Economic release form U.S.

U.S.: Consumer Credit Change: USD 16.05B, positive as compared to the forecasts (US$ 12.75B) as well as the previous 14.08B US Dollar.

U.S.: Import Price Index (YoY): Remained same as the previous release of -1.5%.

U.S.: Trade Balance: US$ -48.73B, quite negative as compared to the forecasts (USD -41.30B) as well as the previous -42.06B US Dollar.

U.S.: Monthly Budget Statement: USD-0.30B, quite positive as compared to the forecasts (US$ -22.50B) as well as the previous -172.11B U.S. Dollar.

Graphical representation of the relative strength of economic releases

(click to enlarge)GBPUSDClick to enlarge

(economic Strength meter copyright

What to expect during the next week:

A break over 1.6180 and then 1.6206 are critical to expect further upward gains and hence GBP/USD outlook stays neutral. The resistance came just 1 pip below the critical resistance of 1.6180. Overall the recent price action indicated that the 1.6000 support is holding and that supports a mildly bullish outlook.

On the upside if break over 1.6180/1.6206 resistance zone takes place then we would expect further gains for a retest of 1.6381. Please note that before that some extended volatile sideway action may take place but as long as 1.5992/1.6000 support holds, the near-term outlook will stay for upward gains.

On the downside any break below the recent 1.5992 will neutralize the near-term bullish sentiments. Such a move should bring further downward consolidation first towards a minor support near 1.5962 (the low of November 28th). Any break below this should target 1.5920 support and then possibly 1.5882 i.e. support of November 21.

By: Himanshu Jain.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.