GBP/USD posted gains throughout the week and gained 1.7%. It was the pair’s best weekly result since October. There are six events in the upcoming week. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.
British Manufacturing PMI climbed above the 50-level in February, with a reading of 51.7 points. This was the first reading in positive territory since April 2019. Construction PMI jumped to 52.6, up from 48.4 a month earlier. This figure beat the estimate of 49.0 points. Services PMI remained in expansion territory, but slowed to 53.2, down from 53.9 points.
In the U.S., the Federal Reserve stole the show with a dramatic rate cut. The Fed slashed rates by 0.50%, which was the first cut between meetings since 2008. At a press conference, Fed Chair Powell acknowledged the severity of the coronavirus threat and added that he expected the rate cut to boost the U.S. economy. The week wrapped up with sharp employment data. Nonfarm payrolls sparkled, climbing to 275 thousand in February, up from 225 thousand. This crushed the estimate of 175 thousand. Wage growth improved from 0.2% to 0.3%, while the unemployment rate dropped from 3.6% to 3.5%.
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- BRC Retail Sales Monitor: Tuesday, 0:01. Retail sales in BRC shops slowed to zero in January, down from 1.7% a month earlier. This figure missed the forecast of 0.6%. The estimate for February stands at 0.2%.
- GDP: Wednesday, 9:30. This GDP release is published every month. In December, the economy rebounded with a gain of 0.3%, after a decline of 0.3% a month earlier. The reading edged above the estimate of 0.2%. Analysts are projecting a smaller gain of 0.2% in January.
- Manufacturing Production: Wednesday, 9:30. This key indicator posted a gain of 0.3% in December, after a decline of 1.7% a month earlier. The January estimate stands at 0.2%.
- Annual Budget Release: Wednesday, 11:30. The brand new Chancellor of the Exchequer, Rishi Sunak, will present the new UK budget. This event, also known as the Spring Statement, will consist of new forecasts for the economy. With the markets in turmoil over the coronavirus crisis, any downgrade could spook investors and hurt the pound.
- RICS House Price Balance: Thursday, 0:01. The housing indicator showed that 17% more surveyors reported an increase in sales than a decrease. This was the first time that the indicator was in positive territory since July 2018.
- CB Leading Index: Friday, 13:30. The Conference Board index came in at zero in December, pointing to weak economic activity. Will we see an improvement in the January figure?
GBP/USD Technical analysis
Technical lines from top to bottom:
We begin with resistance at 1.3375. This line has held since mid-December. 1.3300 is next.
1.3170 has held since the first week of February.
1.3075 (mentioned last week) is an immediate resistance line.
1.2990 has switched to a support role after sharp gains by GBP/USD last week.
1.2920 is protecting the 1.29 level.
1.2820 was breached early in the week.
1.2728 is the final support line for now.
I am neutral on GBP/USD
The pound enjoyed a strong week, but can it continue to make up ground against the dollar? The British economy is performing decently, but the post-Brexit talks with the EU are expected to be difficult, which could mean choppy waters for the British pound.
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