The surging US dollar pummelled the British pound this week, as GBP/USD lost around 260 pips, closing just above the 1.58 line, at 1.5807. The upcoming week is very busy with 10 releases, including CPI and Retail Sales. Here is an outlook for the upcoming events, and an updated technical analysis for GBP/USD. Last week’s UK employment data was positive, but of little help to the pound, which has shed around five cents in the month of May. Trade Balance figures were weak, and the turmoil and instability spreading through the Euro-zone is giving a strong push to the dollar. Updates: HPI figures were a big disappointment. After a strong reading of 2.9% in April, this month’s release was a paltry 0.0%, dampening hopes that the housing sector is at last on the mend. The pound continues to lose ground, and briefly fell below the 1.58 level during weekend trading. USD/GBP was trading at 1.5820. CPI fell in April, dropping to a level of 3.0%. This was a notch below the market forecast of 3.1%. RPI came in at 3.5%, exactly as predicted. Core CPI was a notch above the market forecast, with a reading of 2.1%. HPI disappointed, coming in at a five-month low. The index fell by 0.4%, surprising the markets that had predicted a 0.5% increase. The reading dashed hopes that the housing sector might be improving. Public Sector Net Borrowing was outstanding, recording a strong monthly surplus,with a reading -18.8 Billion. This was well above the market forecast, and the best figures in over five years. The excellent reading couldn’t boost the pound, however, as the crisis in Europe continues. GBP/USD dropped lower, trading at 1.5771. Retail Sales were a big disappointment, as the indicator slumped by 2.3%. These were the worst figures in over four years. CBI Industrial Order Expectations slumped to 17 points, dropping to a five-month low. The market had predicted a smaller drop of -9 points. The pound fell as a result of the weak readings, and was trading at 1.5732. The MPC Meeting Minutes revealed no surprises in the votes on the interest rate and QE votes by the MPC members. GDP contracted for the second straight quarter, confirming that the UK economy is in a recession. The indicator dropped by 0.3%, slightly more than the market forecast of -0.2%, indicating that the UK recession is worse than expected. Mortagage Approvals came in at 32.4K, very close to the market estimate of 32.3K. The quarterly Prelim Business Investment jumped 3.6%, its best performance since May 2010. The pound continues to sag, as GBP/USD was trading at 1.5675. GBP/USD graph with support and resistance lines on it. Click to enlarge: Rightmove HPI: Sunday, 23:01. The House Price Index was up in April, posting a reading of 2.9%. Another strong reading this month could be a sign that the weak housing sector is starting to gain strength. CPI: Tuesday, 8:30. This key inflation index jumped 3.5% compared to a year ago. The forecast for May is lower, with an estimate of 3.1%. Public Sector Net Borrowing: Tuesday, 8:30. This indicator recorded a 15.9B deficit in April, which was the worst reading in 2012. The markets are expecting a strong improvement in May, with a forecast of a 5.4B surplus. If the indicator can meet or beat the estimate, this could be bullish for the pound. RPI: Tuesday, 8:30. The market forecasts tend to be very accurate for this index. The reading for April came in at 3.6%, and very little change is expected for the May release. MPC Meeting Minutes: Wednesday, 8:30. This indicator looks at the interest rate votes by the MPC members. An unexpected voting pattern could affect the movement of USD/GBP. Retail Sales: Wednesday, 8:30. Retail Sales sparked in April, jumping 1.8%. This was the index’s best performance since February 2011. However, the markets are forecasting a weak reading for May, with an estimate of -0.8%. CBI Industrial Order Expectations: Wednesday, 10:00. This diffusion index is based on surveyed manufacturers. The indicator has posted two consecutive weak readings of -8 points, and little change is forecast for the May release. Revised GDP: Thursday, 8:30. This key quarterly indicator dropped 0.2% last quarter, matching the market prediction. No change is forecast for the Q1 reading. Will the indicator surprise the markets with a reading in positive territory? A improved reading in May would be bullish for the pound. BBA Mortgage Approvals: Thursday, 8:30. This indicator helps provide a snapshot of the health and direction of the housing sector. The April reading came in at 31.9K. The market estimate for May calls for a slight improvement, to 32.3K. Prelim Business Investment: Thursday, 8:30. This quarterly indicator has contracted for six consecutive quarters, indicating ongoing weakness regarding capital investments in the UK. The markets are predicting a strong reading for Q1, of 3.2%. This rosy prediction could be overly optimistic, but even if the indicator can climb above the zero level, it would be significant improvement. Traders should, however, keep in mind that the past six readings have all been well below the market forecast. *All times are GMT GBP/USD Technical Analysis GBP/USD opened the week at 1.6072. After reaching a high of 1.6122, the pound plummeted, dropping all the way to 1.5732, before rebounding to close at 1.5807, a notch above the support line of 1.5805 (discussed last week). Technical levels from top to bottom With the continuing sharp drop by GBP/USD, we will adjust our support and resistance lines accordingly. We start with the resistance line of 1.6356, which has not been tested since August 2011. Next, 1.6265, which was tested at the end of April, has strengthened as GBP/USD trades at lower levels. The next line of resistance is at 1.6142. The pair easily broke through the important 1.60 line, which is now back in a resistance role. Next, 1.5930, which was fluid in April, is providing resistance for the pair. Below, there is weak support at 1.5805, as GBP/USD closed just above this line last week. The next line 1.5750, which has provided support since mid-March, but was briefly breached this week. It could be further tested if the pound continues to weaken. Below is the support level of 1.5648, which was last tested in March. This is followed by 1.5603, which has held firm since January. This is followed by the round number of 1.55. The final line for now is 1.5361,which has provided strong support since January. I am bearish on GBP/USD. The pound has had a horrendous May, and the free fall could well continue. The recession in Europe and crisis in Greece are sending nervous investors to safe haven currencies such as the dollar, and the greenback is taking full advantage. With the pair easily pushing below the 1.60 level, what happens next? Unexpected economic data from either the UK or US could affect the pair’s movement, but otherwise the pound’s troubles could be ongoing. 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 the New Zealand dollar (kiwi), read the NZD forecast. For USD/CAD (loonie), check out the Canadian dollar forecast. For the Swiss franc, see the USD/CHF forecast. Kenny Fisher Kenny Fisher Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer. Kenny's Google Profile View All Post By Kenny Fisher GBP USD ForecastMajorsWeekly Forex Forecasts share Read Next Forex Daily Outlook May 21 2012 Anat Dror 10 years The surging US dollar pummelled the British pound this week, as GBP/USD lost around 260 pips, closing just above the 1.58 line, at 1.5807. The upcoming week is very busy with 10 releases, including CPI and Retail Sales. Here is an outlook for the upcoming events, and an updated technical analysis for GBP/USD. Last week's UK employment data was positive, but of little help to the pound, which has shed around five cents in the month of May. 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