GBP/USD Slips to $1.3370 ahead of US Prelim GDP figures
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- European Commission’s Brexit negotiator expressed his woe with the UK’s push for thorough discussions.
- US inflation expectations, combined with US President Joe Biden’s Fed selections, pushed the Fed rate hike woes even higher.
- GBP/USD is trading at $1.3380, having tested the double bottom support level of $1.3350.
The GBP/USD extended its previous day’s losing streak to trade at $1.3468 ahead of the US Prelim GDP figures. During a light schedule in the UK, the GBP/USD struggled with Brexit news and mixed concerns. On the other hand, the broad-based US dollar bullish bias puts some additional burden on the GBP/USD. For example, traders in the GBP/USD currency pair seem to ignore stronger UK PMI data. The figures raised expectations of a rate hike by the Bank of England (BOE).
The British pound weakens as Maro Efovi expresses woe.
A sharp dip in GBP/USD could be linked to the latest reports on Maro efovi. The European Commission’s Brexit negotiator expressed his woe with the UK’s push for thorough discussions. Moreover, it indicates that no solution will be reached until 2022. Effovi said he hoped the UK and EU could make “decisive progress this week” on the drug trade issue between the UK and Northern Ireland. It would “create positive momentum for the rest of the discussions,” Politico reported.
Following the latest negotiations in Brussels on Friday, UK Brexit Minister Lord David Frost stated that no significant progress had been made on the NI protocol problems. In an interview with the BBC on Sunday, European Commission vice-president Maro Efovi urged the UK to stop its “political posturing” and accept that the Brexit deal would not be renegotiated. Furthermore, Ireland’s Foreign Minister, Simon Coveney, stated that the EU would not budge on the European Court of Justice’s (ECJ) involvement in trade regulation.
A stronger dollar drags the GBP/USD lower to 1.3380
On the other hand, the resurgence in US inflation expectations, combined with US President Joe Biden’s Fed selections, pushed the Fed rate hike woes even higher, underpinned the US currency, and contributed to the GBP/USD currency pair’s declines. Furthermore, in the United States, M30-year Treasury yields were not far from their highest level since late October, which they reached earlier this month.As a result, investors’ emphasis has switched to a flood of US data, including the crucial Personal Consumption Expenditures Price Index, quarterly GDP, and the minutes from the Fed’s most recent meeting, which are coming later in the day.
The CME Group’s BoEWatch Toll shows that markets have completely priced in a 20 basis point rate hike by the Bank of England in December, implying that the pound is unlikely to benefit from BoE comments at this time. Market participants are now waiting for US bond yields and broader market risk sentiment to affect USD price dynamics and allow traders to profit from short-term changes in the GBP/USD pair. Furthermore, the British pound has lost ground ahead of the weekend, and the technical picture suggests a bearish turn in GBP/USD. In addition, traders will be keeping a focus on the news surrounding Brexit’s Northern Ireland (NI) protocol negotiations.
US Prelim GDP q/q – What to expect?
In terms of data, we anticipate a minor upward revision to 3Q GDP growth, but October personal spending will be more critical because it will tell us how the fourth quarter began. Based on retail sales, it should be positive while the Fed’s preferred gauge of inflation, the core PCE deflator, will keep rising and come in at double the 2 percent target on an annual basis.
The month’s house sales figures are not expected to change significantly, but an increase in homebuilder sentiment shows that buyer traffic is on the up, which should boost housing activity in the next year. Economists are expecting a surge in prelim GDP from 2% to 2.2%. Typically, the market triggers a sell-off in GBP/USD upon the release of positive data.
GBP/USD Daily technical levels ahead of US Prelim GDP
S3 1.336
S2 1.3369
S1 1.3372
Pivot Point 1.3378
R1 1.3381
R2 1.3386
R3 1.3395
GBP/USD price forecast: Descending triangle to support at $1.3350
The GBP/USD is trading at $1.3380, having tested the double bottom support level of $1.3350. On the 4-hour timeframe, the GBP/USD has formed a descending triangle pattern. As discussed in our previous updates, the descending triangle has a strong probability of exhibiting a bearish breakout. Therefore, the investor’s primary focus stays at the crucial support level of 1.3350.
Increased selling pressure can violate double bottom support at 1.3350. In such an event, the GBP/USD will be exposed to the next support level of 1.3286.
Besides, the series of exponential moving averages support a selling bias at the 1.3420 level. Thus, the formation of candlesticks under these lines adds further selling pressure on GBP/USD. The RSI and MACD remain in a sell zone, respectively below 50 and 0, boosting the odds of a bearish breakout.
The 1.3410 is an immediate barrier. However, a slice through the 1.3410 can drive bulls all the way to the 1.3453 or 1.3515 level. Consider taking a sell position below 1.3350, with immediate targets at 1.3284 and 1.3265. Alternatively, the breakout of the 1.3410 level can help us secure a quick buy trade until 1.3450 or 1.3515. Good luck, and stay tuned for more updates!
