GBP/USD rebounded last week and posted gains. A week prior, the pound suffered its worst week in over two years, with losses of 2.5 percent. There are three events on the schedule in the upcoming week. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.
In the U.K, the key event was Manufacturing PMI, which slipped to 47.5 in December, down from 48.9 a month earlier. The index has not cracked the 50-level since April, which points to ongoing contraction in manufacturing.
The U.S released the Federal Reserve minutes on Friday. Policymakers said they expected rates to remain steady “for a time”, but did note continuing downside risks to the U.S. economy due to global trade tensions. ISM Manufacturing PMI slipped to 47.2 in December, down from 48.1 a month earlier. This was shy of the estimate of 49.0 and the weakest reading since June 2009.
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- Final Services PMI: Monday, 9:30. The PMI is expected to be revised slightly higher to 49.1, after an initial reading of 49.0 in December. This points to contraction in the services sector.
- Halifax HPI: Wednesday, 8:30. The housing inflation indicator recorded a strong gain of 1.0% in November, well above the estimate of 0.2%, The estimate for December stands at 0.6%.
- BRC Retail Sales Monitor: Thursday, 0:01. This consumer spending gauge plunged in November, with a reading of 4.9%. A small decline of 0.5% is projected for December.
GBP/USD Technical analysis
Technical lines from top to bottom:
We start with resistance at the round number of 1.3500. 1.3375 is next.
1.3300 has held in resistance since mid-December. 1.3170 follows.
1.3070 is an immediate support line and could see action early in the week.
1.3000 (mentioned last week) has some breathing room in support after gains by GBP/USD last week.
1.2910 has held in support since early December. 1.2850 is next.
1.2728 has provided support since mid-October.
1.2616 is the final support level for now.
I am bullish on GBP/USD
The U.S. dollar has shown some weakness lately, and the pound has taken advantage, with gains of 2.5% in the month of December. The pound has room to move higher, as the currency climbed above the 1.35 level after the British election.
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