GBP/USD took a tumble last week, as the pound coughed up over a 100 points and slipped below the 1.70 level. The pair closed the week at 1.6964. This week’s highlight is Manufacturing PMI. Here is an outlook for the main events moving the pound, and an updated technical analysis for GBP/USD.
British releases were positive last week, led by GDP which posted a strong gain. However, the US dollar was broadly stronger last week, thanks to strong readings from US employment, housing and manufacturing data.
[do action=”autoupdate” tag=”GBPUSDUpdate”/]GBP/USD graph with support and resistance lines on it. Click to enlarge: 
- Net Lending to Individuals: Tuesday, 8:30. This indicator is closely related to consumer confidence and spending, as increased spending is indicative of a consumer who is optimistic about the economy and in a spending move. The indicator improved to GBP 2.7 billion last month, above the estimate of GBP 2.5 billion. Little change is expected in the upcoming release.
- GfK Consumer Confidence: Wednesday, 23:05. Consumer Confidence has been climbing throughout 2014. In May, the indicator punched above the zero level, which marks optimism, with a reading of 1 point. The markets are expecting the upward swing to continue, with an estimate of 2 points in the June reading.
- Nationwide HPI: Thursday, 6:00. This housing inflation index is an important gauge of activity in the UK housing sector. The index impressed in May, posting a strong gain of 1.0%. This easily beat the estimate of 0.6%. The estimate for the June release is unchanged, at 0.6%.
- Manufacturing PMI: Friday, 8:30. This is the major event of the week. The index continues to post readings in the high-50 range, pointing to solid expansion in the manufacturing sector. The May reading of 57.5 was the best showing this year and well above the estimate of 56.7 points. Another strong reading is expected this time around, with the estimate standing at 57.2 points.
* All times are GMT
GBP/USD Technical Analysis
GBP/USD opened the week at 1.7089 and rose slightly to a high of 1.7099, as resistance at 1.7108 (discussed last week) held firm. The pair lost ground throughout the week, dropping to a low of 1.6964. GBP/USD closed the week at 1.6964.
Live chart of GBP/USD:
[do action=”tradingviews” pair=”GBPUSD” interval=”60″/]
Technical lines from top to bottom
We begin with resistance at 1.7624, which has provided support since March 2006. This marked the start of a stellar rally by the pound, which went on to top the 2.11 level.
The next resistance line is 1.7465. This line has held firm since October 2008. 1.7375 is the next resistance line.
1.7180 has strengthened in resistance as the pound trades at lower levels.
1.7108 held firm for the first time in three weeks, as the pound was unable to push into 1.71 territory. It starts the week as a strong resistance level.
1.6989 was breached late in the week and has switched to a resistance role. It is a weak line and could see action early in the week.
1.6823 continues to provide strong support.
1.6669 is the next support line. It was an important resistance level in March and early April.
Next is the round number of 1.6600. It has remained intact since early April, which marked the start of a rally that saw the pound flirt with the 1.70 line.
1.6466 is the final support line for now. This line marked the bottom of a reverse head-and-shoulders in March.
I am bearish on GBP/USD.
British numbers have been generally positive, but that hasn’t been enough to prevent the pound shedding almost 200 points in July. US numbers continue to point in the right direction, led by the all-important employment indicators. Although inflation remains weak, market sentiment is strong, and this has help the dollar post gains against most of its rivals.
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
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