GBP/USD Daily Forecast – Sterling Under Pressure Following GDP MissThe British pound fell below the 1.27 handle versus the dollar in early European trading after GDP figures fell short of expectations.
Today’s Data was Largely Influenced by Brexit
Gross Domestic Product in the UK grew by 0.3% in the quarter ending April 2019. Growth in the month of April contracted by a staggering 0.4% against the analyst estimate for a contraction of 0.1%.
The report attributed weakness in April to a sudden fall in car production as a result of uncertainty surrounding the UK departure from the EU.
Weakness was also seen in manufacturing in the same month with production declining 3.9% compared to March. This was also attributed to Brexit as Head of GDP Rob Kent-Smith stated “the boost from the early completion of orders ahead of the UK’s original EU departure date has faded.”
Based on the report, the downfall seems to be heavily influenced by the earlier expected EU departure date. In this context, the data might not have a sustained impact on Sterling.
At the same time, I would not look to fade this move. The dollar looks a bit heavy to start the new week as a result of an announcement over the weekend that the United States has reached a deal with Mexico.
As well, I expect any rallies into North American trading will likely be met with sellers.
GBP/USD is already seen testing support from the 100 moving average on a 4-hour chart.
There is some confluence there as a horizontal level at 1.2689 comes into play.
The hourly chart paints a slightly different picture as GBP/USD is attempting to break below the same moving average on that time frame.
Further support for the pair is found at 1.2662 which reflects a confluence of the 200-period moving average and a horizontal level. I see resistance for the session ahead at 1.2714.
- GBP/USD has been trending higher in the past few weeks, I don’t think there’s a confirmed reversal, even after this drop
- Rather than selling GBP/USD, I see better opportunities in the cross rate. EUR/GBP for example just broke to fresh 4-month highs.
- A break below 1.2662 would signal to me the pair has reversed.