GBPUSD started last week by trading higher on Monday as the U.K. Chancellor George Osborne announced that the new Conservative-Liberal Democrat coalition government would release an Emergency Budget on June 22^nd. According to Osborne, the Emergency Budget will contain significant measures to cut down the current high level of public spending in Britain.

Monday also had the U.K. BRC Retail Sales Monitor, which showed a gain of 0.8% year on year versus a previous reading of a loss of -2.3%.

On Tuesday, GBPUSD made its weekly low of 1.4345 as Fitch ratings made a negative statement on the state of the U.K. public spending issue. Nevertheless, the ratings agency did not yet downgrade the AAA credit rating of the United Kingdom. Prime Minister David Cameron assured markets that the Emergency Budget would be able to cope with the country's overspending problem.

Also out on Tuesday, the BRC Shop Index grew by 1.8% year on year, slightly below its previous reading of 2.0%.

Wednesday saw Cable start heading north, hardly phased by the U.K. Trade Balance showing a deficit of -7.3B versus an expected deficit of -7.0B and with the previous number revised upward from -7.5B to -7.3B.

On Thursday, the BOE announced the MPC's decision to leave the benchmark Official Bank Rate unchanged at 0.5%. The central bank also left its Asset Purchase Facility the same at 200B Pounds, as was widely expected.

On Friday, Cable made its weekly high of 1.4757 as U.K. PPI Input came out with a -0.6% month on month decrease versus a -0.9% decrease expected by the consensus. Also, Manufacturing Production declined by -0.4% month on month, considerably worse than the +0.6% increase expected.

GBPUSD then sold off on profit taking to close at 1.4526 on Friday, up just 0.4% for the week.

Fundamental Outlook for GBPUSD

The primary market-moving economic data releases and policymaker speeches scheduled for this coming week in the United Kingdom and the United States are as follows:

United Kingdom:

The upcoming U.K. economic calendar is quite active, with a variety of important data releases coming out this week, although the most notable upcoming event will probably be Tuesday's Inflation Report Hearings.

Monday begins the week with the release of the BOE's Quarterly Bulletin, as well as a speech by MPC Member Posen in New York.

Not only does Tuesday have the key Inflation Report Hearings before the Treasury Committee of Parliament scheduled, but it will also see the release of key inflation data with the CPI (3.5% and 3.0% Core Y/Y) and RPI (5.0% Y/Y) coming out.

Additional data due to be released on Tuesday includes the RICS House Price Balance (16%), the DCLG HPI (10.3% Y/Y), and the CB's Leading Index (last 1.0% M/M).

Wednesday will also be busy, featuring the UK Employment report, with the Unemployment Rate expected to remain unchanged at 8% and the Claimant Count Change expected to show a fall of -25.3K.

Also due out on Wednesday are the Nationwide Consumer Confidence index (74) and the Average Earnings Index (4.4% 3M/Y), as well as a speech in London by BOE Governor King.

Thursday has the important Retail Sales data (0.1% M/M), as well as CBI Industrial Order Expectations (-15).

Friday ends the busy week with Public Sector Net Borrowing (18.3B), Preliminary Mortgage Approvals (49K), plus Preliminary M4 Money Supply (0.2% M/M).

United States:

The calendar of economic data releases for the United States this coming week is rather active, featuring important inflation data that includes Wednesday's PPI data and the CPI numbers due out on Thursday.

Monday begins the week with a speech by FOMC Member Bullard in Tokyo, who will also be speaking in Hong Kong on Tuesday.

Tuesday also offers Import Prices (-1.1% M/M), the Empire State Manufacturing Index (20.1) and TIC Long-Term Purchases (77.3B). The NAHB Housing Market Index (22) is also scheduled tentatively for Tuesday.

These numbers will be followed on Wednesday by the featured release of the Producer Price Index or PPI (-0.5% and 0.1% Core M/M), as well as Building Permits (0.63M), Housing Starts (0.65M), Industrial Production (0.9%M/M) and the Capacity Utilization Rate (74.6%). In addition, Fed Chairman Bernanke is scheduled to make a speech in New York.

Thursday is also a weekly highlight, featuring the important Consumer Price Index or CPI data (-0.2% and 0.1% Core M/M), as well as the Current Account (-120B), Initial Jobless Claims (454K), the Philly Fed Manufacturing Index (21.3) and the CB's Leading Index (0.4% M/M).

Thursday ends the week since Friday has nothing of note due out.

Technical Outlook for GBPUSD

On the technical front, GBPUSD initially traded softer last week, falling as low as 1.4345 on Tuesday, before correcting upward to hit 1.4757 by Friday. Nevertheless, Cable then fell sharply to close at 1.4526, up slightly on the week.

Nevertheless, the medium term bearish outlook still prevails for Cable, as long as it trades below its 200-day Moving Average which currently comes in at 1.5733 and continues to slope convincingly downwards. In addition, the rate's 14-day RSI is currently showing a reading in precisely neutral territory at 50, so it provides little sense of the market's future direction.

Given the resumption of corrective activity last week, the waves indicate that this price action may well continue into this coming week. Projecting the move from 1.4249 to 1.4768 off of the 1.4345 low gives Fibonacci projection correction objectives as follows: 1:1 = 1.4884, 1:1.236 = 1.5011, 1:1.3821=1.5090, 1:1.50=1.5154, 1:1.618 = 1.5217 and 1:2 = 1.5423. The fourth wave of one lesser degree ranges from 1.4474 to 1.5052. If seen, you could look to sell such corrective rallies for new lows below the 1.4229 low of May 20^th.

Resistance for GBPUSD is indicated in the 1.4610/38 and the 1.4757/68 regions, plus at the psychological 1.5000 level. Support shows up in the region of 1.4438/53, at the 1.4345 level, and below that in the 1.4229/58 region.

Note: Past performance is not indicative of future results.

Figure 1: Daily candlestick chart of GBPUSD showing its 200-day MA in red, Bollinger Bands in green and the 14-day RSI in the indicator box in blue.