The British pound gained slightly over one cent against US dollar, as GBP/USD closed just shy of the 1.57 mark, at 1.5698. The upcoming week has nine releases. Here is an outlook for the upcoming events, and an updated technical analysis for GBP/USD.

The pound moved up sharply at the end of last week,  following the surprise announcement at the EU Summit. At the Summit, the leaders announced measures designed to combat the debt crisis and aid struggling EZ members, notably, allowing for the direct recapitalization of banks from Euro-zone rescue funds.

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

1. Manufacturing PMI: Monday, 8:30. The index slipped below the 50 point level for the first time since January. This indicates contraction in the manufacturing sector. Little change is expected in the July release.
2. Halifax HPI: July 3rd-6th. The markets are predicting a 0.4% decline in house prices, a further indication of weak activity in the housing sector.
3. Construction PMI: Tuesday, 8:30. The construction sector continues to be one of the bright spots in the UK economy, as the index has been in the mid-50 points range throughout much of 2012. The market forecast calls for a slight drop in the July reading.
4. Net Lending to Individuals: Tuesday, 8:30. After two consecutive readings of 1.4 billion, the markets are predicting a significant drop to 1.1B. A decline in credit issued would indicate decreased economic activity , and would be bearish for the pound.
5. BRC Shop Price Index: Tuesday, 23:01. This index precedes the official CPI data released by the government. The index climbed 1.5% in June, up slightly from May.
6. Services PMI: Wednesday, 8:30. This key PMI has been around the 53 point level for the past two readings. Little change is expected in the July reading.
7. Asset Purchase Facility: Thursday, 11:00. QE is one of the BOE’s most important monetary tools. QE has stood at 235 billion since March, but the markets are forecasting a large increase, up to 375B. If the market forecast is off the mark, look for the pound to be affected.
8. Official Bank Rate: Thursday, 11:00. The benchmark interest rate has been pegged at 0.50% for over three years.  No change is expected in the July rate decision.
9. PPI Input: Friday, 8:30. This manufacturing index had a very poor reading in June, falling by 2.5%. Another sharp decline is anticipated in July.

*All times are GMT

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5582. The pair dropped to a low of 1.5485, before retracing, as the pound climbed up to a high of 1.5714, as it easily broke through resistance at 1.5648 (discussed last week). The pair closed the week at 1.5698.

Technical levels from top to bottom

We start with resistance at the round figure of 1.62. Close by is the line of  1.6150, which has held firm since early May. This is followed by resistance at 1.6060. Below, is the line of 1.5992, protecting the important 1.60 level.

This is followed by resistance at 1.5930. The next resistance line is just above the 1.58 line, at 1.5805. This line was last breached in late May, as the pound went on a sharp down slide. Close by is 1.5750, which was tested last week, but held firm as the pound surged at the end the week.

Next, 1.5648 which has been alternating between support and resistance roles, is currently providing the pair with weak support. It could be tested if the dollar rebounds after last week’s losses. Support can next be found at the round figure of 1.5600, which just last week was providing resistance to the pair.

Next, there is support at 1.5521. This line has strengthened as the pair trades at higher levels. This is followed by support at 1.5415. Below, there is support at 1.5361, a line which has held firm since early June. Close by, there is support at 1.5309. This line has not been breached since September 2010. This is followed by support at 1.5229. The next support level is at 1.5124, which has not been tested since July 2010. The final support line for now is at 1.5054, which was last breached when the pair moved up sharply in June 2010.

I am neutral on GBP/USD.

The pair was fairly quiet this week, until the dramatic announcement out of the EU Summit. The turmoil in the Euro-zone will be isn’t going to disappear anytime soon, however, and the US is also showing weakness. We could see some further movement by GBP/USD following the QE announcement by the BOE this week.

Further reading:

• For a broad view of all the week’s major events worldwide, read the USD outlook.
• For EUR/USD, check out the Euro to Dollar forecast.
• For the Japanese yen, read the USD/JPY forecast.
• For the Australian dollar (Aussie), check out the AUD to USD forecast.
• For the New Zealand dollar (kiwi), read the NZD forecast.
• For USD/CAD (loonie), check out the Canadian dollar forecast.
• For the Swiss franc, see the USD/CHF forecast.