GBPUSD
If you remember the double top on the daily chart which I pointed out on GBPUSD yesterday, you will notice that the currency pair is now trading below the neckline support. Does this mean that the currency pair is going to trade lower?
Nothing is set in stone when trading the forex market. A strong bearish close below the low of April 7 at 1.2163 could support this assumption. It could mean that there are sellers in the market who could push the currency pair to its March 20 lows at 1.1437. The UK GDP report for Q1 2020 could be the fundamental catalyst for this. The report is expected to show a 2.6% contraction and a worse-than-expected reading could weaken the pound. This is because it could give the BOE one more reason to consider easing monetary policy even further.
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On the other hand, if there are still buyers left in the market, GBPUSD could trade higher. The alternative to the scenario I cited above would be a better-than-expected GDP reading. If the report tops expectations, the GBPUSD could rise to near-term resistance at 1.2358. This price coincides nicely with the 50% Fib level (when drawing the Fibonacci retracement tool from the high of May 8 to today’s low). It also aligns with the falling trendline from connecting the highs of April 30 and May 8.
It is important to take note that there are other factors that could affect the direction of GBPUSD aside from the UK GDP. As what I mentioned yesterday, Brexit talks are expected to resume this week. Rising tensions between the EU and the UK has the potential to overshadow the GDP report and it’s something to keep in mind while trading!