GBP/USD had its best week in three months, climbing 1.1 percent last week. The upcoming week has just two releases. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.
In the UK, inflation has been getting stronger. Headline CPI in January rose to 0.7%, up from 0.6%. This marked a 3-month high. Core CPI remained steady at 1.4%. Retail sales for January fell by 8.2%, much worse than the estimate of -3.0%. Services and manufacturing accelerated in January. Services PMI jumped to 49.7, close to the 50-level which separates contraction from expansion. Manufacturing PMI improved to 54.9.
In the US, January retail sales pointed to a strong rebound in consumer spending. The headline read jumped 5.3% while core retail sales came in at 5.9%. The forecast for both releases stood at 1.1%. The FOMC minutes reiterated a dovish message from the Fed, which signaled that it has no plans to taper QE anytime soon. Services and manufacturing remain well into expansionary territory, as the January PMIs came in at 58.5 and 58.9, respectively.
- Employment Report: Tuesday, 7:00. Jobless claims dropped to 7.0 thousand in December, down from 64.3 thousand beforehand. We now await the January data. Wage growth is expected to accelerate for a sixth successive month, with a forecast of 4.1%, up from 3.6%. The unemployment rate has been creeping higher, and is expected to edge up to 5.1%, up from 5.0%.
- CBI Realized Sales: Tuesday, 11:01. Sales volume plunged to -50 in January, its lowest level since May. Another soft reading is expected for February, with a forecast of -39.
GBP/USD Technical analysis
Technical lines from top to bottom:
We start with a monthly resistance line of 1.4406.
1.4104 has held since April 2018.
1.3985 is next.
1.3917 was breached in resistance for the first time since April 2018.
1.3808 is the first support level.
1.3687 (mentioned last week) is the final support level for now.
I am bullish on GBP/USD
The UK vaccine rollout is gathering steam and the pound is showing positive momentum and breached the 1.40 level last week. In the US, the Biden stimulus package, which will be released shortly, will likely weigh on the US dollar.
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