Despite coming in higher on the GDP print GBP falls to the lows of the day against the USD.
The UK GDP has just come out slightly better than forecast but GBP has fallen to its lows of the day at 1.2630.
*(UK) Q4 ADVANCE GDP Q/Q: 0.6% V 0.5%E; Y/Y: 2.2% V 2.1%E (matches lowest annual pace since Q1 2013) – Source TradeTheNews.com
This has probably left a few traders scratching their heads including myself. It has though coincided with some general USD strength into the early European session and the currency itself has had a very good run to the topside this week thus far.We seem to have a case of buy the rumour and sell the fact.
Positioning will no doubt be lighter now with GBP rallying some 300 points this week thus far, with weaker shorts squeezed out. However, the Brexit put is most likely making traders a little nervous taking GBP higher for now.
GBP has resistance at the day’s highs of 1.2675 and then 1.2780 the post-Brexit high. Following that is the 1.2900 level. Support is at 1.2600 and then 1.2525 the 100-day moving average.
Things look more constructive for GBP against the Euro. EUR/GBP has traded as low as 8466 today and the bounceback has been muted.
Eurgbp has resistance at 8520 and 8565 with support at 8445 and then the all important 8400 level which is also the 200-day moving average.
Longer term, a daily close or two below the 8300 level would imply that a much larger GBP rally is on the cards.
Overall from a technical perspective, GBP’s price action against the USD and Eur looks constructive still. Today’s drop being perhaps a correction to a good run higher this week. Combined with the UK’s continued outperformance on every recent data release, there is the possibility that GBP bears may still have more pain to endure.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes.
He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.
A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others.
He was born in New Zealand and holds an MBA from the Cass Business School.