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GBP/USD posted modest gains last week, marking a fifth straight winning week. This week’s key event is British wage growth. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.

In a week full of political drama in the U.K., the pound showed sharp swings, but ended the week with slight gains. Prime Minister May suffered a humiliating defeat in parliament, as the Brexit withdrawal deal was shot down by over 200 votes. May survived a no-confidence vote, but only by a slim margin. The government will try again to pass a Brexit deal through parliament, but uncertainty and concern are swirling around Britain’s scheduled departure from the EU at the end of March.

British CPI dropped to 2.1% in December, its lowest level since January 2017. Weaker inflation means there is less pressure on the Bank of England to raise interest rates, which it would like to avoid at a time of economic and political uncertainty.

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

  1. Rightmove HPI: Monday, 00:01. The indicator has declined for two straight months, pointing to weakness in the housing market, as cautious consumers are reluctant to make large purchases with the uncertainty around Brexit.
  2. Employment data: Tuesday 9:30. Wage growth has been moving upwards and climbed 3.3% in October. The same gain is forecast for November. Unemployment rolls and the unemployment rate are expected to show little change compared to the previous month.
  3. Public Sector Net Borrowing: Tuesday, 9:30. The budget deficit fell to GBP 6.3 billion in November, and is expected to drop to GBP 1.1 billion in December, which would mark a 5-month low.
  4. CBI Industrial Order Expectations: Wednesday, 11:00. The ongoing global trade war and Brexit tensions could take a bite out of the manufacturing sector, but November and December releases pointed to expansion. The indicator is expected to slow in January, with an estimate of 5 points.
  5. High Street Lending: Friday, 9:30. T This release represents around 60% of all UK mortgages and is released before the official numbers are. Mortgage approvals are expected to 39.0K, down from 39.4 thousand in the previous release.
  6. CBI Realized Sales: Friday, 11:00. Sales volume continues to show strong swings. After a sharp gain of 19 in November, the indicator plunged in December, with a reading of -13 points. The estimate for January stands at 1 point.

* All times are GMT

GBP/USD Technical analysis

The pound had a busy week, marked by strong volatility which included testing the round 1.30 level for the first time since mid-November.

Technical lines from top to bottom:

With GBP/USD continuing to record gains, we start at higher levels.

We start with resistance at 1.3258.

1.3070 was a high point in mid-November. The symbolic number of 1.3000 provided support to the pair in late September. 1.2910 (mentioned last week) was a high point in late November and was busy throughout the week. 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 is next, followed by 1.2590.

Lower, 1.25 is a round number and also worked as support in early 2017.

1.2420 has held since April 2017.

I remain bearish on GBP/USD

The pound has managed to post gains in recent weeks, despite the turmoil surrounding Brexit. However, the May government is in grave trouble and a no-deal Brexit is a strong possibility ,which is a nightmarish scenario for the business community.

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