GBP/USD dropped on the acrimony between the UK and the EU over Brexit. The topic remains left, right and center in the first full week of March. Here are the key events and an updated technical analysis for GBP/USD.

The EU published an explosive draft stating that the UK may be suspended from the Single Market during the transition period, that Ireland will remain in the Customs Union and that the ECJ will continue having power through 2030. UK PM May’s response was swift, saying that no British PM can accept such a deal. The bad blood sent the pound lower. In the US, Trump’s tariffs and potential trade war overshadowed the hawkish stance expressed by Fed Chair Powell, that hinted of four hikes in 2018.

Updates:

GBP/USD daily graph with resistance and support lines on it. 

(Click on image to enlarge)

1. Services PMI: Monday, 9:30. The services sector is the largest in the UK, as in most developed countries. The score is above 50, but not reflecting robust growth. After reaching 53 points in January, a small rise to 53.3 was projected. The actual figure came out better than expected: 54.5 points.
2. BRC Retail Sales Monitor: The British Retail Consortium’s measure of sales rose by 0.6% y/y in January. The figure for February may disappoint, given the slowdown in consumption. The number pre-empts the official retail sales report.
3. Andy Haldane talks: Tuesday, 18:15. The BOE Chief Economist will speak in London and may certainly touch on monetary policy. Haldane previously expressed a dovish stance.
4. Halifax HPI: Wednesday, 8:30. This is one of the most regarded measures of house prices. In January, prices dropped by 0.6%, a second consecutive drop. A bounce of 0.4% is forecast now.
5. RICS House Price Balance: Thursday, 23:01. The Royal Institution of Chartered Surveyors has shown a positive tilt in the balance between buyers and sellers, worth 8%. A drop to 7% is on the cards now.
6. Manufacturing Production: Friday, 9:30. While small, the manufacturing sector is still relevant and has enjoyed stronger growth given the weaker pound. After rising by 0.3% in December, an increase of 0.2% is on the cards now. The wider industrial output measure is projected to rise by 1.6% after falling by 1.3% last time.
7. Goods Trade Balance: Friday, 9:30. Britain has a growing trade deficit that ballooned to 13.6 billion in December. A squeeze to 12 billion is on the cards for January. The publication may have a significant, yet shortlived impact.
8. Construction Output:Friday, 9:30. Output in the construction sector is volatile, but the wider trends are important. A surprising jump of 1.6% was seen in December. A slide of 0.4% is on the cards for January.

GBP/USD Technical Analysis

Pound/dollar failed to break above 1.40 (mentioned last week) and fell to much lower ground, hitting 1.3710.

Technical lines from top to bottom:

1.4345 is the January 2018 swing high that is worth watching. 1.4280 was a top line in early February and it comes next.

1.4150 capped the pair in mid-February. 1.4070 is next, after serving as a swing high in late February.

It is followed by the round level of 1.40, which is eyed by many. 1.3935 was a pivotal line in the range.

1.3850 was the low point in mid-February. 1.3765 was the low point in early February. 1.3710 was a low point in early March.

1.3620 capped the pair on its way up and then turned into support. 1.3550 was the November peak.

I remain bearish on GBP/USD

Brexit is still an issue even if there is hope for a quick deal. The question of the Irish border cannot be circumvented, no matter what. In addition, the UK economy is struggling.