Volatility returned to GBP/USD last week, but this time the pound moved sharply lower, falling 1.50%. This week’s key events include monthly GDP and the PMI reports. Here is an outlook for the highlights of the upcoming week and an updated technical analysis for GBP/USD.
In the U.K., manufacturing orders slumped, as the sector remains in trouble. CBI Industrial Order Expectations fell to -28 in September, down sharply from the previous release of -13. GfK Consumer Confidence continued to paint a bleak picture, coming in at -12 in September.
In the U.S., third-estimate GDP for Q2 came in at 2.0%, confirming the second estimate. This is significantly lower than the robust gain of 3.1% in the first quarter. On the political front, President Trump was in the headlines, as Congress has commenced impeachment proceedings. A leaked phone call between Trump and the Ukrainian President showed that Trump had made inquiries about Joe Biden, a presidential candidate and his business dealings in the Ukraine. Still, the impeachment process is a lengthy one which is unlikely to impact on the currency markets, at least for now.
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- Current Account: Monday, 8:30. The U.K. regularly records a current account deficit. In Q1, the deficit ballooned to GBP 30.0 billion, its highest deficit in three years. The deficit is expected to drop sharply in the second quarter, with an estimate of 19.2 billion.
- Final GDP: Monday, 8:30. The initial estimate for GDP in the second quarter came in at -0.2%, pointing to contraction in the economy. The upcoming second-estimate release is expected to confirm the initial estimate.
- Manufacturing PMI: Tuesday, 8:30. The U.K. manufacturing sector is struggling and the PMI has pointed to contraction for four successive months. In August, the index dipped to 47.4, its lowest level since 2012. The downward momentum is expected to continue in September, with an estimate of 47.0.
- Construction PMI: Wednesday, 8:30. In 2019, the index has posted readings below 50 in all but two months. This points to ongoing contraction in the construction industry. The index dipped to 45.0 in August and no change is forecast for the September release.
- Services PMI: Thursday, 8:30. Services PMI slowed to 50.6 in August, down from 51.4 a month earlier. This points to stagnation in the services sector. Another weak reading is expected in September, with the estimate standing at 50.3.
GBP/USD Technical analysis
Technical lines from top to bottom:
With GBP/USD registering sharp losses last week, we begin at lower levels:
1.2616 has provided resistance since early July. 1.2535 is next.
1.2420 (mentioned last week) switched to a resistance role after GBP/USD dropped sharply during the week.
1.2330 is an immediate resistance line.
The round number of 1.22 was an important support level in December 2016.
1.2080 is protecting the symbolic 1.20 level.
1.1944 is the final support line for now.
I remain bearish on GBP/USD
The pound has been unexpectedly strong of late, but sharp losses this week have sent cable to 3-week lows. There could be more turbulence ahead for the pound, with the U.K. scheduled to leave the EU in a month and London and Brussels still far apart on a withdrawal agreement,
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