GBPUSD Turns Red: The Dollar Ends Pound’s Winning Streak, But Will It Hold?

Summary:
• The dollar has ended the pound’s 5-day winning streak, as GBPUSD turns red on US GDP expectations. However, there’s more to look forward to.

The British pound has fallen against the US dollar in the Wednesday mid-morning European session, going down -0.42% to trade at 1.2632 at the time of writing. GBPUSD is under pressure from the market as traders favour the dollar ahead of the scheduled release of US GDP reading. Furthermore, the pair’s struggles are compounded by the lack of high-impact macro data scheduled on Wednesday.

Barring a lower-than-expected US GDP figure, GBPUSD’s run of six consecutive days of gains against the dollar will almost certainly come to an end. The market’s decision to ignore Tuesday’s lower-than-expected US macro data is telling. January Durable Goods Orders fell by -6.1%, beyond the projected -4.9%. Also, the February Consumer Confidence came in at 106.7, falling below the projected 114.8.

Nonetheless, the US dollar clawed back against the euro, despite a hawkish statement by BoE Deputy Governor for Markets and Banking, Dave Ramsden. This is proof that many traders expect the GDP figure for the fourth quarter of 2023 to show a +3.3% growth or higher. However, the dollar’s rise will be under pressure from declining US Treasury yields. The 5-year and 10-year Treasuries have experienced diminished yields since Monday, and were down by 2 basis points at press time.

Beyond the GDP reading, GDPUSD could also be moved by speeches from two FOMC members and one BoE Monetary Policy Committee member. However, that will largely depend on the margin of divergence between the GDP reading and the forecast estimate.

Technical analysis

GBPUSD has a pivot at 1.2665, and its RSI indicator favours a bearish-leaning momentum. With the sellers in control, the pair will likely find the first support at 1.2610. A breach of that mark could create sentiment to target the 1.2600 psychological support. However, if the buyers build momentum to control the market above 1.2655, they could push the pair to meet resistance at 1.2685. Further control beyond that point will render the bearish narrative invalid, and target 1.2700.