GBPUSD Clings to Support at 200 SMA Ahead of UK GDP Report

Summary:
• Movement on GBPUSD has been limited so far in today’s trading as the market braces for the UK GDP report which is due to be released later this morning.

Movement on GBPUSD has been limited so far in today’s trading as the market braces for the UK GDP report which is due to be released later this morning. As of this writing, GBPUSD is trading slightly lower at 1.2545 from its opening price at 1.2552.

Due at 7:00 am GMT, the GDP report for May is expected to show that the economy grew by 5.5% during this month. This forecast follows April’s massive contraction of 20.4%. Along with this, data on industrial production and manufacturing production are also due to be released. The forecasts for these reports are at 6.2% and 7.5%, respectively. Meanwhile, Construction Output for the month is eyed at 14.9%. Lastly, the Goods Trade Balance data is eyed to show an 8.2 billion GBP contraction.

Higher-than-expected data could be bullish for GBPUSD. This is because they would suggest that the UK economy is slowly recovering from the effects of the coronavirus pandemic. On the other hand, disappointing figures may weigh down the currency pair.

Technical Analysis

On the 1-hour time frame, it can be seen that GBPUSD has recently broken support at the neckline of a double top chart pattern. When you enroll in our free forex trading course, you will learn that this is characterized by a market getting rejected at a resistance level twice. For GBPUSD, that resistance level was 1.2660. A strong close below the neckline could indicate a bigger move downward. If there are enough sellers in the market, it could mean that GBPUSD may soon fall to support at 1.2450 where it bottomed on July 3.

On the other hand, it is worth noting that the currency pair is still testing the 200 SMA for support. Reversal candlesticks around its current price could suggest that buyers may soon push GBPUSD higher. Near-term resistance is at 1.2580 where it could retest the previous neckline. This price also corresponds to the 38.2% Fib level when you draw the Fibonacci retracement tool from the high of July 13 to today’s low.

If resistance at this level does not hold, the next ceiling for the currency pair could be at its July 13 highs at 1.2665.

GBPUSD, 1-Hour Chart