GBP/USD dropped over 1.3% last week, as Brexit uncertainty and turmoil continue. We’ll get a snapshot of the health of the British economy, with the release of PMI reports. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.
Prime Minister May has been unable to pass her withdrawal agreement through parliament, despite three attempts to do so. There was plenty of drama in Whitehall, when lawmakers rejected eight alternative options to the Brexit withdrawal agreement. This worsened the deadlock over Brexit, as parliament has rejected a no-deal exit, but at the same time, has rejected all other options. Not surprisingly, the pound responded with sharp losses last week. The new Brexit deadline is April 12, but it remains uncertain if parliament will change its mind and approve May’s withdrawal deal.
In the U.S., growth remains respectable, but the economy has slowed down. Final GDP disappointed with a gain of 2.2%, compared to the initial reading of 2.6%. Personal spending posted a weak gain of 0.1%, and CB consumer confidence fell to 124.1, down sharply from 131.4 in the previous release.
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- Manufacturing PMI: Monday, 8:30. The manufacturing sector has been damaged by the global trading war as well as uncertainty over Brexit. The PMI has slowed for two straight months. Another drop is expected for March, with an estimate of 51.2 points.
- Construction PMI: Tuesday, 8:30. The construction sector has dropped for three successive months, and the February reading of 49.5 pointed to contraction. Another weak reading is projected for March, with a forecast of 49.8 points.
- BRC Shop Price Index: Wednesday, 00:01. The British Retail Consortium’s inflation gauge improved in February, with a strong gain of 0.7%. This was its strongest gain since 2013. Will the positive momentum continue?
- Services PMI: Wednesday, 8:30. This is the third PMI release of the week. The indicator has been hovering just above the 50 level, which indicates stagnation. Little change is expected in the March release, with an estimate of 51.0 points.
- Halifax HPI: Friday, 7:30. The Halifax Bank of Scotland’s measure of house prices is considered quite accurate due to the bank’s sheer size. The indicator tends to show sharp swings from month-to-month. After a strong gain in February of 5.9%, the markets are braced for a decline of 2.5% in March.
GBP/USD Technical analysis
Technical lines from top to bottom:
With the pair dropping sharply last week, we start at lower levels:
The round number of 1.34 has held in resistance since June 2018.
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.
The symbolic number of 1.3000 is next.
1.2910 has held in support since mid-February,
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 am bearish on GBP/USD
The Europeans grudgingly extended the Brexit deadline, but the deadlock remains in place. The likelihood of a hard Brexit in which the U.K. crashes out of the EU with no deal remains high, which will likely weigh on the pound this week.
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