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GBP/USD suffered its worst week in almost two months, falling 1.35%.  This week’s key events are GDP and manufacturing production. Here is an outlook for the highlights of the upcoming week and an updated technical analysis for GBP/USD.

June PMI reports headed lower, contributing to the pound’s losses last week. The manufacturing indicator dropped to 48.0, marking a second straight week of contraction. This missed the estimate of 49.5. The construction PMI fell sharply, coming in at 43.1, compared to the forecast of 49.4. This marked the sharpest construction since April 2009. On the services front, the PMI slowed to 50.2, pointing to stagnation. The reading was shy of the forecast of 51.0. The latest PMI reports point to a slowdown throughout the economy, raising concerns about the economic outlook.

In the U.S., the services sector PMI continues to indicate expansion, but the indicator slowed in May. The ISM Non-Manufacturing PMI disappointed, slowing to 55.1, down from 56.9 a month earlier. This missed the estimate of 56.1. Key employment numbers were a mix in June. Wage growth remained stuck at 0.2% for a third successive month. Nonfarm payrolls rebounded with a strong gain of 224 thousand, crushing the estimate of 162 thousand. The unemployment rate ticked up to 3.7%, above the estimate of 3.6%.

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

  1. BRC Retail Sales Monitor: Monday, 23:01. This indicator is a useful inflation indicator. The indicator is pointing to weak inflation, with three declines in the past four months. Another decline is expected in the June release, with an estimate of -1.5%.
  2. GDP: Wednesday, 8:30. GDP is one of the most important indicators and should be considered a market-mover. The monthly indicator declined 0.4% in April, shy of the forecast of -0.1%. The markets are expecting a rebound in May, with a forecast of 0.3%.
  3. Manufacturing Production: Wednesday, 8:30. This key indicator nosedived in April, falling 3.9%. The May release is expected to be much better, with an estimate of 2.2%.
  4. RICS House Price Balance: Wednesday, 23:01. The indicator showed improvement in May, as only 10% more of surveyors reported a drop in prices. This was much better than the reading of -23% a month earlier. The forecast for the June release stands at -12%.
  5. BoE Financial Stability Report: Thursday, 9:30. The Bank of England publishes its thorough report on financial stability twice a year. Apart from the details on banks, the BOE also makes available some economic assessments which are relevant to monetary policy.
  6. CB Leading Index: Friday, 13:30. The index, based on 7 economic indicators, declined by 0.2% in April. Will we see an improvement in the May release?

* All times are GMT

GBP/USD Technical analysis

Technical lines from top to bottom:

With the pair dropping sharply last week, we start at lower levels:

1.2910 has held in resistance since mid-May.

1.2850 capped recovery attempts in late November.

1.2728 remained relevant last week.

1.2660 (mentioned last week) remains a weak support level.

1.2590 remained relevant last week. It was a swing low in September 2017.

Lower, 1.25 is a round number and also worked as support in early 2017. Further down is 1.2420.

1.2330 has provided support since March 2017.

The round number of 1.22 was an important support level in December 2016.

I remain bearish on GBP/USD

All three British PMIs softened in June, a trend that is sure to worry investors, as the dark cloud of Brexit continues to swirl. With the U.S. posting an excellent nonfarm payrolls report at the end of the week, the greenback rally could continue,

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