GBPUSD Technical Analysis 2014, 21.12 - 28.12: Ranging Bearish with 1.5540 Key Resistance - Ready For Next Breakdown?

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newdigital, 2014.12.19 19:27

Forex Weekly Outlook December 22-26 (based on forexcrunch article)

GDP data from Canada and the US, US Durable Goods Orders, New Home Sales, Unemployment claims, Haruhiko Kuroda’s speech are the major topics in Forex calendar. heck out these events on our weekly outlook.

Last week, Federal Reserve Chair Janet Yellen switched the phrase “considerable time” with the word “patience” in referral to rate hikes, at the FOMC press conference. The move was made to calm markets awaiting sharp policy shifts. Three Fed officials registered their dissent expressing discomfort with the Fed’s message. The Jobless claims came out better than expected with a drop to 289K, reaffirming US labor market’s strength. Philly Fed Manufacturing index came below expectations reaching 24.5 following the steep rise in November, still maintaining a positive score. New orders plunged from 35.7 to 15.7 and employment down from 22.4 to 7.2 points. Will the US economy continue to strengthen in 2015?

1. Canadian GDP: Tuesday, 13:30. Canada’s economy expanded 0.4% in October after higher oil, gas and mining extraction, as well as manufacturing boosted growth. October’s reading was preceded by a 0.1% contraction in August. Since Canada is a major oil exporter, the Bank of Canada estimates that the slide in oil prices will reduce Canadian economic growth by 1/3 percentage points, somewhere between 2% and 2.5% in 2015. Poloz is also worried by household imbalances risking financial stability, leaving the door open for additional guidance in the future. Markets expect Canadian GDP to rise 0.1% in November.
2. US Durable Goods Orders: Tuesday, 13:30. U.S. durable goods orders picked up in October beating expectations for a 0.4% fall. New orders rose by 0.4%, reaching $243.8 billion. Meanwhile, demand for manufactured goods, excluding transportation dropped 0.9% to $167.6 billion in October, after a 0.1% rise in the prior month. Analysts believe the decline suggests that business capital spending is weakening in Q4.The Fed expects GDP to slow to 2.5% in the fourth quarter. Long lasting product orders are expected to surge by 3%. While core orders are predicted to 3edge up 1.1%.
3. US GDP: Tuesday, 13:30. On The second estimate of real gross domestic product for the third quarter of 2014 showed an annual rate increase of 3.9%, weaker than the 4.6% gain posted in the second quarter. However, this forecast was upwardly revised from the advance estimate of 3.5% released in October. Personal consumption expenditures and nonresidential fixed income investment increased more than expected, but export growth was slower than previously thought. The final GDP release for the third quarter is expected to reach 4.3%.
4. New Home Sales: Tuesday, 15:00. Sales of new U.S. homes rose modestly in October, following a pickup in activity in the Midwest. New home sales increased 0.7% to a seasonally adjusted annual rate of 458,000. Economists expected a higher figure of 471,000. Sales of existing homes rose 1.5% in October to a seasonally adjusted annual rate of 5.26 million, adding another positive sign that the housing market is recovering. Analysts exdpect new home sales to reach 461,000 in November.
5. US Unemployment Claims: Wednesday, 13:30. Fewer Americans filed claims for unemployment benefits last week, indicating increasing confidence among employers. The weekly unemployment claims dropped 6,000 to a seasonally adjusted 289,000, the lowest level since late October. The four-week average dropped 750 to 298,750. In the first 11 months of this year, employers have added 2.65 million jobs, posting the best hiring since 1999. The number of new claims is expected to reach 291,000 this week.
6. Haruhiko Kuroda speaks: Thursday, 3:45. BOE Governor Haruhiko Kuroda speaks in Tokyo. Bank of Japan Governor Haruhiko Kuroda stated the bank will meet its 2% inflation target and continue to increasing base money, or cash and deposits at the bank, at an annual pace of 80 trillion yen ($674 billion). Kuroda said Japan’s economy continues to recover moderately after the tax hike effect subsides.

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newdigital, 2014.12.20 09:45

GBPUSD Fundamentals (based on dailyfx article)

Fundamental Forecast for Pound: Bullish

• British Pound may have set lasting low versus US Dollar
• Sterling may indeed continue higher versus the Euro and other major counterparts

The British Pound traded higher versus all G10 counterparts save the US Dollar and Japanese Yen. Why might it continue higher through the foreseeable future?

There’s relatively little in the way of foreseeable economic event risk out of the UK next week, and that may in fact play in the domestic currency’s favor. It was only two weeks ago when GBP/USD volatility prices traded to multi-year peaks, and a negative correlation between vols and the GBP helped explain why it fell sharply on clear uncertainty. Yet in a remarkable shift in sentiment, the Sterling now boasts the lowest volatility prices of any G10 currency. If correlations hold firm, this may be enough of a reason for continued appreciation.

A key exception comes from final revisions to Q2 Gross Domestic Product growth numbers due Tuesday, but surprises are relatively unlikely and only a big miss would force important GBP volatility. Beyond that, traders will keep an eye on the usual slew of early-month US economic event risk—especially the end-of-week US Nonfarm Payrolls report.

With the Scottish Independence Referendum now past, the UK currency can return to basics and trade off of traditional fundamental factors. Credit Suisse Overnight Index Swaps show that the Bank of England will raise benchmark interest rates by approximately 0.50 percentage points in the coming 12 months. This may not seem like much, but it is only second to the US Federal Reserve (and US Dollar) at +0.58%.

The clear divergence in growth and yield expectations between the UK and other major economies leaves the GBP in the position of strength. And though an obvious US Dollar uptrend makes us reluctant to buy into GBPUSD weakness, we believe the UK currency could trade higher through the coming week and perhaps month.

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newdigital, 2014.12.20 15:44

GBP/USD forecast for the week of December 22, 2014, Technical Analysis

The GBP/USD pair fell during the bulk of the week, but bounce slightly in order to form something along the lines of a hammer. At the end of the day, and looks as if we are trying to find support near the 1.55 level. With that, we think that eventually this market bounces significantly, and then heads to the 1.60 handle. We have no interest in selling this market at least until we get below the 1.55 handle, which we do not anticipate to see happening this week.