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GBP/USD was almost unchanged for a second straight week. The upcoming week has six events, including inflation and retail sales. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

UK unemployment claims were much worse than expected, with a reading of 94.4 thousand. The estimate was 9.7 thousand. Wage growth fell 1.2% in June, marking a second straight decline. GDP reports were mixed. The monthly report showed a gain of 8.7% in June, above the estimate of 8.1%. However, the initial reading for Q2 GDP declined by a staggering 20.4%, reflecting the severe economic impact of Covid-19. As well, Manufacturing Production climbed 11.0%, up from 8.4% beforehand.

In the US, consumer inflation was unchanged at 0.6% in July. The core reading improved to 0.6%, up from 0.2% beforehand. There was good news on the employment front, as unemployment claims fell to 963 thousand, down from 1.186 million. This marked the first time that new claims have fallen below the 1-million mark since mid-March, before the spread of Covid-19. Retail sales reports were mixed. The core reading came in at 1.9%, above the estimate of 1.3%. However, the headline read posted a gain of 1.2%, shy of the estimate of 2.0%.

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

  1. Inflation Report: Wednesday, 6:00. The headline reading ticked up to 0.6% in June, up from 0.5% beforehand. The estimate for July stands at 0.5%. Core consumer inflation improved from 1.2% to 1.4% in July, but is projected to slow to 1.3%.
  2. CBI Industrial Order Expectations: Thursday, 10:00. Manufacturers continue to expect decreasing volume, but the rate of decline has been easing. In July, the indicator improved from -58 to -46, and the forecast for August stands at -34.
  3. GfK Consumer Confidence: Thursday, 23:01. The British consumer remains pessimistic about economic conditions. The indicator has come in at -27 for the past two months and the estimate for August stands at -25.
  4. Retail Sales: Friday, 6:00. Retail sales have posted double-digit gains for the past two months, but analysts are expecting a small gain of 2.0%.  
  5. Manufacturing PMI: Friday, 8:30. The manufacturing sector is showing slight expansion. The PMI posted a reading of 53.3 in July and the forecast for the initial August read stands at 54.0. The 50-level separates expansion from contraction.
  6. Services PMI: Friday, 8:30. The index punched into expansion territory in July, climbing from 47.0 to 56.5. The forecast for the initial reading for August is 57.0.  

Technical lines from top to bottom:

1.3513 is the 52-week high for the pair.

1.3312 has held in resistance since December 2019.

1.3207 is next.

1.3154 has some breathing room in resistance.

1.3049 is an immediate support line.

1.2891 is next.

This line is followed by 1.2838.

1.2718 (mentioned last week) has provided support since July 24.

1.2616 is the final line for now.

I am neutral on GBP/USD

The pound managed to dodge a bullet, with Q2 GDP falling by over 20%. With both the UK and the US grappling with severe economic conditions due to Covid-19, the pair could remain calm next week.

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