GBPUSD consolidated most of last week, and notably failed to benefit much from prevailing U.S. Dollar weakness largely as a result of disappointing U.K. PMI surveys. The rate started out the week on a positive note as it traded up to its high point for the week of 1.5573 during Monday's session as the United Kingdom observed its Summer Bank Holiday.

Nevertheless, Tuesday then saw the rate reverse direction to the downside as the rate traded down to its weekly low point of 1.5324. This decline may have been inspired in part by the release of U.K. Net Lending to Individuals that gained just 0.3B for the month against the expected 0.7B rise the market was anticipating. Nevertheless, Tuesday also saw the release of some favorable results from the U.K. including GfK Consumer Confidence survey which showed a reading of -18 - a considerable improvement over the market's consensus for a -23 reading. T Furthermore, U.K. Final Mortgage Approvals showed a slightly better than expected rise of 49K compared with the anticipated 47K increase the market was looking for.

GBPUSD then started gaining ground sharply on Wednesday as the Greenback weakened in the wake of a disappointing U.S. ADP Non-Farm Employment Change number. Nevertheless, the U.K. Manufacturing PMI survey came out at only the 54.3 level compared with the consensus of a 57.1 reading, and this disappointment was compounded by the previous reading being revised down to 56.9 from 57.3. Perhaps as a result, the rate then reversed and Cable began heading downward again on Thursday. The decline was also spurred by news that the U.K. Nationwide PMI survey had fallen by -0.9% for the month compared with an expected fall of just -0.3%. Also adding to Cable's drop was a disappointing result for the U.K. Construction PMI survey which was released at the 52.1 level that was weak compared with the anticipated 53.5 number.

GBPUSD then managed to rally back on Friday in spite of U.K. Services PMI being released at the 51.3 level that was under the anticipated 53.0 number the market was looking for. Cable eventually closed lower for the week at the 1.5461 level, showing a small overall drop of 0.3% from the previous weekly close.

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 week of economic data releases scheduled in the United Kingdom warms up somewhat from last week. The week features the release of the important BOE Rate Decision and its associated MPC Rate Statement that are both due out on Thursday.

Monday offers nothing notable on the economic front, so Tuesday starts the active week off with the BRC Retail Sales Monitor (last 0.5% y/y). The important Halifax HPI (-0.3% m/m) is also scheduled for release on either Tuesday or Wednesday.

Wednesday has the BRC Shop Price Index (last 1.5% y/y), Manufacturing Production (0.3% m/m) and Industrial Production (0.4% m/m) scheduled for release. The NIESR GDP Estimate (last 0.9%) is also tentatively due out on Wednesday.

Thursday then offers the weekly highlight of the BOE's Rate Decision in which the central bank is expected to keep its benchmark interest rate unchanged at 0.5% and the Asset Purchase Facility at GBP 200 Billion. The associated MPC Rate Statement is also tentatively due out. Thursday also has the U.K. Trade Balance (-7.5B) scheduled for release.

Friday closes down the week with the release of the important PPI Input (0.2% m/m) and PPI Output (0.1% m/m) data, in addition to the CB Leading Index (last 0.5% m/m).

United States:

The upcoming economic data release calendar scheduled for the United States calms down substantially during the coming week, but it will still offer some significant information for the forex market to absorb. With respect to data, the coming week will feature the important U.S. Trade Balance number due for release on Thursday.

Monday begins the week on a quiet note as the United States observes its Labor Day Bank Holiday, and Tuesday is similarly quiet.

As a result, Wednesday begins the week with the scheduled release of the important Federal Reserve Beige Book, in addition to Consumer Credit (-4.5B m/m).

Thursday should provide the weekly highlight with the release of the U.S. Trade Balance (-47.4B), in addition to the significant Initial Jobless Claims number (470K).

Friday finishes the relatively quiet week, with only the release of Wholesale Inventories (0.4% m/m) scheduled.

Technical Outlook for GBPUSD

On the technical front, GBPUSD came off in early trading last week down as far as the 1.5324 level and making a new recent low. The rate then consolidated above that level and ended the week at 1.5461 on Friday, showing a small overall drop of 0.3% from the previous weekly close. This close again managed to end up just above the rate's 200 day Moving Average around which the rate has recently been consolidating.

Furthermore, GBPUSD is currently trading well under a key rising trend line - that is now drawn at the 1.5896 level - derived from a rising channel which had contained recent price action in GBPUSD since mid-May until breaking on August 18^th. The break of this channel set up a ~401 pip measured move from the 1.5622 breakout point that targets 1.5221. This target is still in play since the most recent low only reached as far down as 1.5324.

In addition, Cable has generally remained below the 23.6% Fibonacci Retracement level located at 1.5579 of the rise seen from the 1.4229 May 20^th low to the 1.5996 August 6^th high. If sustained, this sets up the next 38.2% level as a target which is located at 1.5321 and which was almost touched in the recent move down to 1.5324. Below that, the 50% level is at 1.5113, the key 61.8% level is at 1.4904 and the 100% level is at 1.4229.

Also, the rate's 14-day RSI has continued to trade below the lower line of its former upwards channel pattern, forming what could be a new consolidation pattern, although the recent lows at 1.5369 and 1.5324 did not show bullish divergence and so it may be part of a down trend instead. The key indicator currently reads in the central part of neutral territory at 48.

Furthermore, GBPUSD is currently trading just above its 200 day Moving Average that now comes in at 1.5433 and remains downward sloping, although the indicator's slope has flattened somewhat. Other than a brief penetration below it last week, the indicator seems to be a magnet for the consolidation of recent price action. As a result, the rate's medium term outlook has now been neutralized compared to its former bearish reading.

After having closed on Friday at 1.5461, resistance to the topside for GBPUSD shows in the 1.5465/1.5488, 1.5590/1.5616 and 1.5669/1.5711 regions. Support is indicated at 1.5440, in the 1.5324/69 region and at 1.5227.

Overall, this scenario argues for remaining short GBPUSD for the near term ahead of the broken rising lower channel trend line for the aforementioned 401 pip measured move that targets 1.5221. Although the medium term outlook for GBPUSD remains neutral, longer term traders could watch for the rate to sustain a fall below the 200-day moving average for a shorting signal.

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, Fibonacci Retracement levels in royal blue, Trend Lines in purple and the 14-day RSI in the indicator box in pale blue.