GBP/USD reversed directions last week, gaining 200 points. The pair closed at the 1.31 line. This week’s highlights are CPI and Retail Sales. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.
In the UK, Brexit jitters increased as all three PMIs reported softer growth in May and missed estimates. The latest political scandal involving Donald Trump Jr. has hurt the dollar, and Yellen’s concern about low inflation also weighed on the greenback.Updates:
- Jul 20, 17:20: Mueller dives deeper into Trump – Dollar dives too – updates: US President Donald Trump is in deeper trouble. Special Counsel Robert Mueller will expand his probe into Trump’s personal businesses....
- Jul 20, 10:30: UK retail sales beat with +0.6% – GBP/USD jumps: Good news from the UK: consumers were more active in June. Retail sales are up 0.6% and this comes on...
- Jul 18, 16:33: Yellen is not loving it, markets do – MM #152: The dollar and bond yields were on the back foot while stocks advance on a mix of Yellen’s testimony on...
- Jul 18, 11:59: USD sell-off extends – How far will it go?: Republicans are likely to settle for repealing Obamacare but without any replacement. The imminent failure of Trumpcare comes on fertile...
- Jul 18, 10:30: UK inflation slips to 2.6% – GBP plunges – Carney could flip again: Price rises are taking a break in the UK. Maybe the recent hawkishness of the BOE could be unwound. Headline...
- Jul 17, 16:12: Buy GBP/JPY – Citi trade of the week: GBP/JPY is often known as “the dragon” due to its wild nature. Volatile currency pairs also provide opportunities. The team...
GBP/USD graph with support and resistance lines on it. Click to enlarge:
- Rightmove HPI: Sunday, 23:01. This indicator is a gauge of activity in the housing sector. The June reading of -0.4% was the first decline in 2017. Will we see a gain in the July report?
- CPI: Tuesday, 8:30. CPI is one of the most important indicators and should be treated as a market-mover. Inflation continues to rise and climbed to 2.9% in May, beating the estimate of 2.7%. Another gain of 2.9% is expected in June.
- PPI Input: Tuesday, 8:30. This indicator measures inflation in goods and services purchased by manufacturers. In May, the index declined 1.3%, worse than the forecast of -0.5%. Another decline is expected in June, with an estimate of -0.8%.
- RPI: Tuesday, 8:30. RPI is similar to CPI but excludes housing costs. The index continues to climb, and hit 3.9% in May, above the estimate of 3.7%. The forecast for June is 3.6%.
- BoE Governor Mark Carney Speaks: Tuesday, 13:30. Carney will speak at an event in Hampshire. The markets will be looking for clues regarding future rate hikes.
- Retail Sales: Thursday, 8:30. This is the primary gauge of consumer spending. In May, the indicator declined 1.2%, missing the estimate of -0.9%. The markets are expecting a rebound in June, with an estimate of 0.3%.
- Public Sector Net Borrowing: Friday, 8:30. The UK deficit narrowed to GBP 6.0 billion in May, smaller than the estimate of GBP 7.3 billion. The deficit is expected to continue to shrink in June, with an estimate of GBP 4.3 billion.
*All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.2888 and dropped to a low of 1.2811. It was all uphill from there, as the pair jumped to 1.3114, testing resistance at 1.3112 (discussed last week). GBP/USD closed the week at 1.3097.
Technical lines from top to bottom
We start with resistance at 1.3480.
1.3347 has held in resistance since September 2016.
1.3238 is next.
1.3112 was tested in resistance as the pair posted sharp gains late in the week.
1.3020 is an immediate support line. It is protecting the symbolic 1.30 line.
1.2902 is the next support line.
1.2775 has been a cushion in July.
1.2634 is the final support line for now.
I am neutral on GBP/USD.
The British economy is showing some signs of fatigue and the Brexit cloud is making investors nervous. The Fed is on record that it will raise interest rates a third time in 2017, but the markets have their doubts, as inflation remains weak and second quarter numbers in the US have not impressed.
Our latest podcast is titled Yellen is not loving it, markets do
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