The British pound ended the week relatively unchanged against the US dollar, down 0.11 percent after having started Monday on a good footing. The GBPUSD remains under pressure from a mixed bag of economic data and an overall risk-off sentiment in the market.

On the UK data front, manufacturing activity has picked up in June, with the manufacturing PMI rising above the 50 mark. However the CBI Trades survey, which gives an indication of short term retail trends, albeit having gained from the previous reading still came in below expectations at -37%, showing signs of weakness in the level of consumption in the UK.

In the US, a resurgence in coronavirus cases in the southern states prompted governors in Florida and Texas to reimpose lockdown restrictions in order to stem the new tide of covid-19 infections. A record increase of 40,000 new cases in a day sent investors to the safe haven US Treasuries and greenback.

From a technical perspective, there isn’t much to suggest the GBPUSD won’t continue on its current downtrend, with the pair almost setting a new monthly low on Friday’s close. The cable’s next test would be the 1.22294 support level above the significant 1.20 mark, which has helped contain further losses since May.

The MACD and RSI indicators both point towards a continuation in the trend though we might see some mean reversion in the pair around the 1.22 handle. The Doji candle on the weekly chart is suggesting a longer-term bearish trend ahead. Traders may aim for a cautious short in the GBPUSD and ride the selling wave into the start of next week with a potential target of 1.226.

Looking ahead, UK Q1 GDP figures will be released. We will likely see increased volatility in the upcoming sessions as traders speculate over the speed of the economic recovery amidst some recent jitters over new cases of coronavirus transmissions in Europe. Better than expected GDP growth figures should lift the pound all else equal.

Investors will also be focused on the progress in the trade agreement negotiations between the UK and EU, which may weigh on the British pound, especially if there is talk any talks of extending deadlines. In the short run, we can expect further “bait the rallies” type of scenario in the GBPUSD.

Support & Resistance Levels:

R3 1.2789
R2 1.2631
R1 1.2439

S1 1.2229
S2 1.2068
S3 1.1904

Analyzed by: Mr. Thibault Moirez, Independent Analyst