Sterling opens the week broadly lower as prime minister David Cameron finally announced to hold the EU referendum on June 23. Pro-Europeans argued that a “yes” to Brexit would rock the EUR and trigger break-up of the UK by prompting another Scottish independence vote. Cameron is also open in backing for EU membership. However, London Major Boris Johnson declared that he “will be advocating vote leave”. Economists noted that the uncertainty over the result of the referendum would weigh on Sterling in near term and at least cap any advances.

From, Japan PMI manufacturing dropped to 50.2 in February, below expectation of 52.0. The sub-index for new export orders dropped to 47.9, the lowest reading since February 2013. Markit noted that “latest data indicated only marginal growth in operating conditions at Japanese manufacturers. Production increased at the slowest rate in the current 10-month sequence of expansion, led by a marginal drop in new orders for the first time since June last year.”

As for today, European data will be the major focus today. Eurozone PMI manufacturing and services are both expected to drop slightly in February. In particular, there is expectation that France PMI manufacturing would dip below 50 again. Swiss will release PPI. UK will release CBI trends total orders. Looking ahead, a couple of important data will be released including German Ifo, US home sales, durable goods, GDP revision Japan CPI, and UK GDP revision. Here are some highlights for the week:

  • Tuesday: German Ifo; US S&P Case Shiller house price, existing home sales, consumer confidence
  • Wednesday: Australia wage price index; Swiss UBS consumption indicator; UK BBA mortgage approvals; US new home sales
  • Thursday: German Gfk consumer sentiment, Eurozone M3, CPI final; UK GDP revision; US durable goods orders, house price index
  • Friday: New Zealand trade balance; Japan CPI; German CPI; US GDP revision, personal income and spending

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.4295; (P) 1.4346; (R1) 1.4445; More

GBP/USD opens lower this week but stays in range of 1.4079/4667 and outlook is unchanged. Consolidation pattern from 1.4079 might extend with another rise. But even in that case, we’d expect strong resistance from 61.8% retracement from 1.5239 to 1.4079 at 1.4796 to limit upside and bring down trend resumption finally. On the downside, break of 1.4079 will extend the larger fall towards 1.3503 low.

In the bigger picture, the fall from 1.7190 is viewed as resuming the long term down trend from 2.1161 (2007 high). Further decline should be seen back to 1.3503 (2008 low). We’d start to look for reversal signal below there. In any case, medium term outlook will remain bearish as long as 1.5929 resistance holds.

GBP/USD 4 Hours Chart

GBP/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
2:00 JPY PMI Manufacturing Feb P 50.2 52 52.3
8:00 EUR France Manufacturing PMI Feb P 49.9 50
8:00 EUR France Services PMI Feb P 50.4 50.3
8:15 CHF Producer & Import Prices M/M Jan -0.20% -0.40%
8:15 CHF Producer & Import Prices Y/Y Jan -5.50%
8:30 EUR Germany Manufacturing PMI Feb P 52.1 52.3
8:30 EUR Germany Services PMI Feb P 54.8 55
9:00 EUR Eurozone Manufacturing PMI Feb P 52.1 52.3
9:00 EUR Eurozone Services PMI Feb P 53.4 53.6
11:00 GBP CBI Trends Total Orders Feb -12 -15

This article originally appeared at Action Forex.