GBP/USD Forecast: Pound hits 32-month high

GBP/USD enjoyed a sold week, gaining close to 1.0 percent. The upcoming week has five releases, with a focus on PMIs. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

The pound is enjoying some positive momentum from the Brexit deal, as the currency has climbed to its highest level since May 2018. It was a quiet Christmas week, with only one British release on the calendar. Nationwide HPI edged down from 0.9% to 0.8%.

In the US, the Chicago PMI rose to 59.5 in December, up from 58.2 and beating the forecast of 56.6 points. Pending Home Sales declined for a third straight month, with a reading of -2.6%. The week ended on a positive note, as unemployment claims dropped for a second straight week, falling to 787 thousand.

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

1. Manufacturing PMI: Monday, 9:30. The manufacturing sector continues to show strong expansion, with readings well above the neutral-50 level. The second-estimate is expected to confirm the initial estimate of 57.3 points.
2. BRC Shop Price Index: Wednesday, 00:01. The inflation index continues to register declines. The November reading of -1.8% was the lowest level since May, as Covid-19 has weighed heavily on economic activity. We now await the December release. 
3. Services PMI: Wednesday, 9:30. After a string of releases in expansionary territory, the index has fallen below the 50-level, which separates contraction from expansion. The second estimate is expected to confirm the initial estimate of 49.9 points.
4. Construction PMI: Thursday, 9:30. After sinking to just 8.2 in April, construction has battled back and is comfortably within expansionary territory. The index improved to 54.7 in December, up from 53.1 beforehand.
5. Halifax HPI: Friday, 8:30. The index rebounded in November with a gain of 1.2%, after a weak reading of 0.3% a month earlier. Another strong reading is expected in December, with a forecast of 1.0%.

GBP/USD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.4016.

1.3812 is next.

1.3769 has held in resistance since May 2018.

1.3624 is the first line of support.

1.3502 (mentioned last week) was tested in support last week.

1.3340 is next.

1.3249 is the final support level for now.

I am bullish on GBP/USD

The pound has had only one losing week since October, as sentiment towards the US dollar remains low. In addition, the signing of the Brexit agreement has brought a sense of relief to the markets and is a bullish event for the pound.