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The pound  showed some strong movement in both directions, and managed to post some gains this week. GBP/USD closed just shy of the 1.52 line, at 1.5198. This week’s major events include PMIs, the  Official Bank Rate, and Asset Purchase Facility.  Here is an outlook of the events and an updated technical analysis for GBP/USD.

British inflation numbers, including CPI, missed  their estimates, and  Retail Sales looked awful.  GDP salvaged the week,  gaining 0.3%, which matched the forecast.


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

GBP_USD Forecast June 3-7

  1. Manufacturing PMI: Monday, 8:30. Manufacturing PMI has  been moving upwards, and came in at 49.8 points in the previous release. The estimate for the June reading is 50.3. If the index can push across the 50-point level, it will be the first  time the index is pointing to expansion in the manufacturing sector since February.
  2. BRC Retail Sales Monitor: Monday, 23:01. In May, this consumer spending indicator declined for the first time in 2013, dropping 2.2%. The markets will be hoping for a turnaround in the upcoming release.
  3. Halifax HPI: Tuesday, 4th-7th. The housing inflation index had an excellent reading in May, with a gain of 1.1%. This was the sharpest climb since January. However, the markets are expecting a much weaker release in June, with the estimate standing at 0.2%.
  4. Construction PMI:Tuesday, 8:30. Construction PMI climbed in May to  49.4 points.  The index has not been above the 50-point line since November 2012, indicating ongoing contraction in the UK construction sector. The forecast for the June release stands at 49.7 points.
  5. BRC Shop Price Index: Tuesday, 23:01. This index measures stores that are part of the BRC retail chain. The indicator posted a gain of just 0.4% in May, and the markets will be hoping for an improvement this time around.
  6. Services PMI: Wednesday, 8:30. This PMI has been above the 50-point level since January, indicative of expansion in the services sector. The estimate for the June release stands at 53.1 points.
  7. Asset Purchase Facility: Thursday, 11:00. Analysts will be carefully watching whether the BOE stands pat or raised QE to help the sluggish British economy. The central bank has pegged QE at 375 billion pounds since mid-2012, and the markets are expecting this level to be maintained.
  8. Official Bank Rate: Thursday, 11:00. The BOE will set its benchmark interest rate level for June. Analysts expect the rate to remain at 0.50%, where it has stood since early 2009. In the unlikely event that the  rate changes, the BOE will release a Rate Statement.
  9. Consumer Inflation  Expectations: Friday, 8:30. This indicator has been fairly steady, with recent readings in the 3.5% range. No significant change is expected in the upcoming release.
  10. Trade Balance: Friday, 8:30. The UK continues to post monthly trade deficits, and the past two releases have seen larger deficits than expected. The estimate for the June release stands at -8.8 billion pounds. Will the indicator meet or beat this prediction?

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5129. The pair  dropped close to the 1.50 level, touching a low of 1.5008. The pair rebounded, climbing up to 1.5240, as resistance at 1.5258 (discussed last week).    held firm. GBP/USD  closed the week at  1.5198.

[do action=”tradingviews” pair=”GBPUSD” interval=”60″/]

Technical lines from top to bottom:

We  begin with strong resistance at 1.5648.  This line has  held firm since mid-February. We next encounter resistance at 1.5550. This line was providing support  at the start of the month, but fell as the GBP/USD went on a sharp slide. Next, there is  resistance at  1.5484. This is followed by 1.5416. We next encounter support at 1.5258. This line  held as the  GBP rallied nicely.  This line was active last week, and has strengthened in resistance as the pair trades at lower levels. Next, 1.5189 is providing weak resistance. It could see more action early this week.

GBP/USD  is receiving  support at 1.5189. This is a weak line, and could  see more activity  early in the week.  The next support level is at 1.5061. This line has strengthened as the pair trades at higher levels.  This is followed by 1.5010, protecting the all important 1.50 level.  The pair briefly broke through this line before rebounding strongly in mid-week. Below is 1.4896, just below the round number of 1.49. It has held  fast since mid-March. The final support line for now is 1.4648, which was last tested in June 2010.

I  am neutral  on GBP/USD.

We were treated to some volatility from the pound last week, as the pair moved between 1.50 and 1.52 during a busy week. GBP/USD did post some gains, but will it be able to consolidate them? The  British economy  continues to look weak, and British PMIs will have a major say in what direction the pair heads in this week. If the US rebounds from last week’s poor showing, the dollar could push higher against the pound.

Further reading: