GBP/USD April 29 – May 3 – Will BoE extend the pound slide?

GBP/USD posted considerable losses for a second straight week, closing the week below 1.30 for the first time since February. The upcoming week is light, with four events. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.

Public sector net borrowing posted a deficit of GBP 0.8 billion, missing the estimate of a surplus of 0.8 billion. CBI Realized Sales rebounded with a sharp gain of 13, crushing the estimate of zero.

In the U.S, last week’s numbers were positive. Durable goods orders climbed 2.7%, crushing the estimate of 0.7%. Core durable goods orders gained 0.4%, marking a 9-month high. This was followed by a strong initial GDP release of 3.2% in Q1, well above expectations. This was much stronger than Final GDP for Q4, which came in at 2.2%.

GBP/USD daily graph with resistance and support lines on it. Click to enlarge:

1. GfK Consumer Confidence: Monday, 23:01. The well-respected GfK indicator continues to show deep pessimism on the part of consumers. After two straight readings of -13, the April estimate stands at -12 points.
2. BRC Shop Price Index: Tuesday, 23:01. The British Retail Consortium inflation indicator continues to climb and posted a strong gain of 0.9% in March.
3. Manufacturing PMI: Wednesday, 8:30. The PMI was unexpectedly strong in March, with gain of 55.1. points. This pointed to strong expansion. The April forecast stands at 53.2 points.
4. Net Lending to Individuals: Wednesday, 8:30. Consumer borrowing dropped to GBP 4.6 billion in March, matching the estimate. The downward trend is expected to continue in April, with an estimate of GBP 4.5 billion.
5. Construction PMI: Thursday, 8:30. The construction sector has been limping in the U.K., with two straight declines. An improvement is expected in March, with an estimate of 50.4 points.
6. BoE Decision: Thursday, 11:00. The BOE is set to maintain the benchmark rate at 0.75% (raised to this level back in August) and the QE program at 435 billion pounds. The Monetary Policy Committee (MPC) voted unanimously to maintain this policy in the previous meeting and the same voting pattern will probably be repeated. If the Monetary Policy summary is on the dovish side, the pound could lose ground.
7. Services PMI: Friday, 8:30. The PMI slipped to 49.8 in March, pointing to contraction. Better news is expected in April, with an estimate of 50.4 points.

* All times are GMT

GBP/USD Technical analysis

Technical lines from top to bottom:

1.3375 was a high point in July. It is followed by the round number of 1.3300.

1.3217 was the high point of the pound rally in late January.

1.3170 was a swing high in early November.

1.3070 was a high point in mid-November.

Late in the week, the pair broke through support at the round number of 1.3000.

1.2910 (mentioned  last  week) has held in support since mid-February. It remained relevant last week.

1.2850 capped recovery attempts in late November.

1.2728 was active in the first half of January.

1.2616 is the final support level for now.

I remain bearish on GBP/USD

The U.S dollar is on a roll, and the momentum could continue this week. Investors were impressed with an excellent initial GDP reading for Q1, and the BoE monetary policy summary could paint a somber economic outlook, especially with the turmoil surrounding Brexit.

Further reading:

• EUR/USD forecast  – for everything related to the euro.
• USD/JPY forecast  – projections for dollar/yen
• AUD/USD forecast  – predictions for the Aussie dollar.
• USD/CAD forecast  – Canadian dollar analysis
• Forex weekly forecast  – Outlook for the major events of the week.

Safe trading!