Pound-to-Dollar Rate Forecast for the Week Ahead

- GBP/USD is in strong uptrend which has been capped by a large moving average

- The main release for the Dollar in the week ahead is Non-Farm Payrolls

- The Pound could be moved by business survey data in the form of PMIs

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Pound Sterling opened the new week on the front-foot against the US Dollar with bulls attempting to set aside the soft ending to March at the start of a new quarter.

The GBP/USD exchange rate was rising quite steadily until it hit heavy sell orders at the level of the 200-week moving average (MA) which it is struggling to break above.

This ceiling could prove problematic for the exchange rate in the near-future.

Note in the long-term chart below how the 200-week MA has exactly capped the exchange rate at the level of its two most recent peaks, this illustrates how tough the moving average can be as a chart resistance level.

Despite the strength of the 200-week MA, the pair is still, nevertheless, in an uptrend and we think there is a possibility it could break above the MA and continue higher.

For confirmation of a clearance above the 200-week MA, however, we could want to see a move above the 1.4346 highs, with such a move expected to reach as far as 1.4500.

On the daily chart, a triangle chart pattern is also forming. It still has a few more waves to go before completing but once it does it will probably breakout higher in line with the previous trend.

Just as on the weekly chart we foresee a break above the January 25 highs as providing the confirmation for a continuation higher to an upside target at 1.45.

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Data and events to watch for the US Dollar

The main release for the US Dollar in the week ahead is probably Non-Farm Payrolls (NFPs), out on Friday, April 6 at 13.30 GMT.

NFP's are expected to continue showing relatively robust strength and rising by 195k in March compared to the 313k registered in February. Anything at or over 200k is considered very good.

Last month's result was not attended by strength for the Dollar purely because Average Earnings data, released at the same time as NFP's, was disappointing. Wages are more important than NFPs now since they are a more direct indicator of inflationary pressures.

Higher inflation leads to higher interest rates which lead to a stronger currency.

Also of importance to the Dollar in the week ahead is all the commentary from US Federal Reserve (Fed) officials, including Kashkari (Monday 23.00, Tuesday 14.30), Brainard (Tuesday 21.30), Bullard (Wednesday 14.45), Mester (Wednesday 16.00), Bostic (Thursday 18.00) and Chairman Powell (Friday 18.30).

Analysts will be scrutinizing what they say for indications of their stance on interest rates since the Fed is in charge of putting up interest rates.

One major release for the Dollar which is already out after it was released this afternoon was the Manufacturing ISM, a survey-based indicator of activity in both manufacturing and non-manufacturing sectors of the economy (the non-manufacturing ISM is out on Wednesday), compiled by the Institute of Supply Managers.

Manufacturing ISM rose to 59.3 in March, which was below the forecast of 60.1 and the previous result of 60.8 for February.

ISM Non-Manufacturing is forecast to reveal a slowdown to 59.2 from 59.5 when it is released on Wednesday at 15.00.

Data and Events to Watch for the Pound

The main releases in the week ahead for Pound Sterling are the PMI (Purchasing Manager Index) business surveys, which provide a timely and reliable gauge of levels of activity and growth in various different industry sectors.

"The PMIs for Britain are expected to be down across the board. That would be a fairly negative combination," says Marshall Gittler, chief currency strategist at ACLS Global, in relation to the expected impact on Sterling.

Although Manufacturing PMI has been falling for a while both the construction and service-sector PMIs were up last month which provided a counter-weight to the negative Manufacturing data, however, "that’s not expected to happen this month. As a result, the figures could be negative for the pound," says Gittler.

He is not the only analyst to forecast a negative result, Ryan Djajasaputra an analyst at Investec, says:

"We suspect that the wintery weather during the month may have had an impact and are forecasting a two-point fall in the services PMI to 52.5 and a more modest half a point drop in the manufacturing PMI to 54.7."

Manufacturing PMI is out at 9.30 on Tuesday, April 3, and is forecast to slide to 54.8 from 55.2; Services is out at 9.30 on Thursday, April 5, and is forecast to fall to 54.2 from 54.5; and Construction at the same time on Wednesday and is forecast to decline to 51.2 from 51.4.

To round off the week there is a speech from Bank of England (BOE) governor Mark Carney at 16.15, which is significant as it may hint at whether the BOE still intends to raise interest rates in May as the market currently expects.

An interest rate hike would lift the Pound by supporting inflows of capital from investors seeking somewhere profitable to park their money.

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