GBP/USD Forecast June 6-10

GBP/USD  posted strong losses last week, dropping 120 points. The  pair closed the week at the 1.45 line. This week’s key event is Manufacturing Production. Here is an outlook on the major events moving the pound and an updated technical analysis for GBP/USD.

British Manufacturing PMI came in at 50.1, pointing to no growth in the manufacturing sector.  Over in the US, Non-Farm Payrolls shocked the markets with disastrous gain of only 38K jobs.

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

1. BRC Retail Sales Monitor: Monday, 23:01. This indicator measures the change in retail sales volume in BRC shops. The indicator has posted two consecutive declines, pointing to weakness in consumer spending in the UK.
2. Halifax HPI: Tuesday, 7:30. This indicator provides a snapshot of the level of activity in the UK housing sector. The index declined 0.8% in April, well short of the forecast of a 0.1% gain. The markets are expecting a strong turnaround in the May report, with an estimate of 0.3%.
3. 30-year Bond Auction: Tuesday, Tentative. Yields on 30 year-bonds have been steady, with the April yield edging up to 2.35%, compared to 2.21% in the February auction. Will the upward trend continue in the June report?
4. Manufacturing Production: Wednesday, 8:30.  This is the key event of the week. The indicator posted a weak gain of 0.1% in March, shy of the forecast of 0.4%. Another small gain of 0.1% is expected in the April release.
5. NIESR GDP Estimate: Wednesday, 14:00. This monthly event helps analysts track official GDP releases, which are released on a quarterly basis. The indicator has been very steady, posting three straight gains of 0.3%.
6. RICS House Price Balance:  Wednesday, 23:01. The indicator provides a snapshot of the level of activity in the UK housing sector. The index showed little movement in April, with a reading of 41%. The markets are expecting the indicator to soften in May, with an estimate of 36%.
7. Goods Trade Balance:  Thursday, 8:30. This indicator is directly linked to currency demand. In Q1, the trade deficit narrowed to GDP 11.2 billion, matching the forecast. Little change is expected in the second quarter report.
8. Consumer Inflation Expectations:  Friday, 8:30.  This event, released each quarter, helps analysts track consumer inflation. The index continues to post declines, with the past two releases coming in at -1.7%. Will we see an improvement in the April report? The indicator slipped to 1.8% in the first quarter, indicative of weak inflation levels in the UK.

* All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.4621. The pair climbed to a high of 1.4725, as resistance held firm at 1.4752 (discussed last week).The pair then reversed directions and dropped to a low of 1.4384.  GBP/USD closed the week at 1.4499.

Live chart of GBP/USD: [do action=”tradingviews” pair=”GBPUSD” interval=”60″/]

Technical lines from top to bottom

 We begin with resistance at 1.4849.

1.4752 held firm in resistance as GBP/USD posted gains early in the week before retracting.

1.4635 has been a resistance line since early February. It held firm last week as GBP/USD posted strong gains.

1.4562 remains a weak resistance line. It could see further action early in the week.

1.4413 was a cap in January. It is an immediate support line.

1.4297 is protecting the 1.43 line.

1.4148  is next.

1.4038 is the final support level for now.

I am  bearish on GBP/USD.

Despite a dismal NFP report, the US economy continues to outperform the British economy. As well, recent polls are showing a close race over the Brexit referendum, which is weighing on cable.

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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 kiwi, see the NZD/USD forecast.
• For the Australian dollar (Aussie), check out the AUD to USD forecast.
• For the Canadian dollar (loonie), check out the USD to CAD forecast.