GBP/USD had a quiet Christmas week, closing the week almost unchanged. The upcoming week will be busy, highlighted by British PMIs for manufacturing, construction and services. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.
The pound sustained slight losses in December, as the U.S. dollar was broadly lower against its major rivals. The Christmas holiday allowed investors to forget about Brexit for a bit, but the chaos over Britain’s departure from the EU in less than 100 days could send the currency sharply lower in the coming weeks.
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- British Manufacturing PMI: Wednesday, 9:30. Manufacturing growth was stronger than expected in November, with a reading of 53.1. The December forecast stands at 52.6.
- Construction PMI: Thursday, 9:30. The indicator has moved higher for two straight months, but the markets are braced for a slowdown in December, with an estimate of 52.9.
- BRC Retail Shop Price Index: Thursday, 00:01. This event is a useful gauge of consumer spending, a key driver of economic growth. The indicator posted a weak gain of 0.1% in November. Will we see another positive reading to end off the year?
- Net Lending to Individuals: Friday, 9:30. Borrowing levels are closely correlated to consumer spending and confidence. The indicator has risen in the past two months and the upward trend is expected to continue in December, with an estimate of GBP 5.1 billion.
- Services PMI: Friday, 9:30. The indicator fell to 50.4 in November, pointing to stagnation in the services sector. Another weak reading is expected in December, with a forecast of 50.8.
* All times are GMT
GBP/USD Technical analysis
The pound posted considerable gains at the start of the week but was unable to consolidate. With GBP/USD showing little movement last week, our technical analysis remains largely unchanged.
Technical lines from top to bottom:
1.3170 was a swing high in early November.
1.3070 was a high point in mid-November. The symbolic number of 1.3000 is important after providing support to the pair in late September. 1.2910 was a high point in late November. 1.2850 capped recovery attempts in late November.
Further down, 1.2790 served as support late August and also beforehand. 1.2765 was a swing low in mid-November. It is followed by the trough of 1.2725 seen earlier that month.
1.2660 remained busy throughout the week. 1.2590 is next.
Even lower, 1.25 is a round number and also worked as support in early 2017. It could break this week.
Further down, 1.2420 and 1.2330 are notable.
I remain neutral on GBP/USD
The pound ended 2018 with two winning weeks, as GBP/USD has shrugged off the recent turmoil in global equity markets. With only one British event on the schedule, traders can expect another quiet week from the pair.
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