GBP/USD lost ground last week, and the pair closed the week below the 1.24 line for the first time since early April. With no major British indicators this week, U.S. events can be expected to have a magnified effect on the pair.
Key British indicators were mostly positive last week, but this wasn’t enough as the pound lost ground. Wage growth climbed 3.4%, marking a 3-month high. Unemployment rolls jumped by 38.0 thousand, much higher than the estimate of 18.9 thousand. CPI remained unchanged at 2.0%, while the core reading was also unchanged, at 1.8%. Retail sales sparkled, with a gain of 1.0%. This easily beat the estimate of -0.3%.
In the U.S., durable goods orders rebounded nicely in June. The headline reading gained 2.0%, crushing the estimate of 0.8%. Core durable goods orders jumped 1.2%, easily beating the estimate of 0.2%. The week wrapped up with Advance GDP for Q2, which dropped to 2.1%. Still, this beat the estimate of 1.8%. The markets are eyeing the Federal Reserve, with the CME Group pricing a rate cut at 78%. This would mark the first rate cut since 2008.
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- CBI Industrial Expectations: Tuesday, 10:00. Manufacturers remain pessimistic, as the Confederation of British Industry survey has been slowing since the start of the year. The June reading of -15 is expected to be repeated in the July release.
- High Street Lending: Wednesday, 8:30. The number of new mortgages approved by the major banks has been fairly steady. The indicator dipped to 42.4 in May and is expected to rise slightly, with a forecast of 42.7.
- CBI Realized Sales: Thursday, 10:00. Sales volume plummeted in June, with an abysmal reading of -42. The markets had predicted a flat zero. Will we see an improvement in July?
GBP/USD Technical analysis
Technical lines from top to bottom:
1.2850 capped recovery attempts in late November.
1.2728 is the next resistance line.
1.2535 has switched to a resistance role. Next is 1.2420, which is providing support.
1.2330 has provided support since March 2017.
The round number of 1.22 was an important support level in December 2016.
1.2080 is the final support line for now.
I am bearish on GBP/USD
The pair has headed south in July, and the downward trend could continue. Boris Johnson will have his work cut out for him when he takes over as Prime Minister this week, succeeding Theresa May. His hard stance on Brexit will not gain him any friends in Brussels, and the uncertainty over Brexit could take its toll on the British pound.
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