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GBP/USD posted slight gains last week. The upcoming week has four releases, including GDP. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

Strong UK employment numbers gave the sterling a slight boost early last week. Wage growth jumped to 3.6%, up sharply from 2.7%. Unemployment rolls rose by just 7 thousand, well below the estimate of 47.5 thousand. The unemployment rate nudged up from 4.9% to 5.0%, its highest level since March 2016.

British Manufacturing PMI slowed to 54.1, down from 54.7. Still, the reading was above the neutral 50-level, which indicates expansion. Services PMI dropped sharply to 39.5, down from 49.4. This sharp contraction was due to the strict COVID-19 lockdowns. Construction PMI fell into contraction territory for the first time since May, with a reading of 49.2. This missed the estimate of 53.0.

The Bank of England maintained interest rate and QE levels at its policy meeting. BoE Governor Bailey assured the markets that the BoE was not signaling that it planned to introduce negative interest rates, although the BoE did tell banks to be prepared for such a scenario.

In the US, ISM Manufacturing PMI dipped to 58.7, down from 60.7 beforehand. Still, this figure points to strong expansion, as manufacturing remains a bright spot in the US economy. The services sector grew for an eighth straight month in a row, as the ISM Services PMI improved to 58.7, up from 57.2 beforehand. This was the highest reading since February 2019.

U.S. Nonfarm Payrolls disappointed with a negligible gain of 49 thousand, which didn’t even reach the forecast of 85 thousand. Wage growth rose 0.2%, down from 0.8% beforehand. There was better news from the unemployment rate, which dropped from 6.7% to 6.3%, its lowest level since March.

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

1. BRC Retail Sales Monitor: Tuesday, 00:01. Retail sales in BRC shops slowed to 4.8% in December, down from 7.7% beforehand. Will we see a rebound from January's report?
2. RICS House Price Balance: Wednesday, Tentative. The index has shown strong improvement in recent months, pointing to a stronger housing market. The upcoming estimate is that 60% of property surveyors will report an increase in house prices.
3. Prelim GDP: Friday, 7:00. After the huge swings in GFP in the past two quarters, GDP is expected to show a negligible gain of 0.5%. An unexpected reading could affect the movement of GBP/USD.
4. Manufacturing Production: Friday, 7:00. This indicator slowed to 0.7% in December, down from 0.7% beforehand. The downtrend is expected to continue, with an estimate of 0.5%.

GBP/USD Technical analysis

Technical lines from top to bottom:

• We start with resistance at 1.4128, an important monthly line.
• 1.3917 is next.
• 1.3838 has held in resistance since May 2018.
• 1.3666 (mentioned last week) is the first support line.
• 1.3540 is next.
• 1.3470 has held in support since late December.
• 1.3327 is the final support level for now.

I am neutral GBP/USD

The UK economy is being hampered by COVID-19 lockdowns, while in the US, the Biden stimulus bill could be bearish for the US dollar.