The Pound Has Reached $1,40. We Are Expecting a Report on the UK GDP

Last week the GBP/USD currency pair showed the greatest activity and volatility. The pound was under pressure due to the release of weak statistics on retail sales, consumer prices and the labor market of the UK. These reports triggered an aggressive sell-off of the pound. Quotations fell by more than 1.5% and reached a two-week low.

Additional pressure was provided by the comments by the Bank of England head Mark Carney. The official took a cautious stance and said that the Central Bank was concerned about the ambiguous economic reports. The regulator will not rush to raise interest rates next month. It should be recalled that previously more than 95% of participants in financial markets expected an increase in the interest rate at the meeting on May 10. At the moment, the figure has reached 50%.

In the near future, we do not exclude further fall in GBP/USD. Demand for the American currency remains at a fairly high level. Support is provided by the growth of the US government bonds yield and the weakening of geopolitical risks.

This week, investors' attention will be focused on the UK GDP report. This statistic may have a significant impact on further alignment of forces on the GBP/USD currency pair.

UK GDP Growth
Source: tradingeconomics.com

Experts expect that in the first quarter of 2018 the growth of the UK economy will slow from 0.4% to 0.3%. Year-on-year, the indicator will be 1.4%. We recommend you to pay attention to the difference between the actual values and the forecasted ones.

The analysis of the CME exchange data (Chicago Mercantile Exchange) allowed to distinguish the option levels of major players' interest for April 06 – May 09:
  • The resistance zone – 1.4250-1.4150
  • The support zone – 1.3850-1.3950
  • The option balance level – 1.4050
GBP/USD Pattern

At the moment, the GBP/USD quotes are below the option balance level of 1.4050, which indicates the power of the sellers. The MACD histogram also signals the bearish sentiment. Nevertheless, in the near future we recommend opening positions from the key levels.

If the price fixes below the local support level of 1.39400, further decrease of the GBP/USD currency pair is expected. The movement is tending to the lower boundary of the monthly control zone – 1.3850.

Alternative option. If the UK GDP statistics are optimistic, GBP/USD may again test the option balance level of 1.4050.

When tracking positions, one should use a trailing stop.

by JustForex, 2018.04.24

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