GBP/USD Daily Forecast – Sterling Under Pressure Following GDP Miss

The British pound fell below the 1.27 handle versus the dollar in early European trading after GDP figures fell short of expectations.
Jignesh Davda
GBP/USD

 

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.

Technical Analysis

GBP/USD is already seen testing support from the 100 moving average on a 4-hour chart.

GBPUSD 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.

GBPUSD Hourly Chart

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.

Bottom Line

  • 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.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US