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GBP/USD Daily Forecast – Sterling Falls Below 1.3000 as UK GDP Falls Short

Jignesh Davda

UK GDP Fell 0.3% in November

The Office for National Statistics reported a fall of 0.3% in GDP for November, falling short of the analyst forecast for an unchanged reading. On a three-month rolling basis, GDP grew by only 0.1%, marking a second consecutive month of slowing.

GBP/USD had dropped about half a percent and was active among the major ahead of the report. This suggests market participants may have anticipated a weak report, causing the drop below 1.3000 ahead of it.

The pair had decline roughly half a percent ahead of the report and last traded for a loss of about 0.7%.

GBP/USD has been declining for a number of factors and a recovery in the dollar is one of them. Last week, the trade-weighted dollar index (DXY) broke higher from a range that had contained it for nearly two weeks.

The index eased back following Friday’s US jobs report but is seen once again approaching fresh highs for the month.

Friday’s NFP figures showed the headline increase and average hourly earnings short of analyst expectations in December. However, the unemployment rate held steady at 3.5%.

The remainder of the trading session does not have any market-moving data releases scheduled for the pair. This could lead to a slowing of volatility for GBP/USD.

Technical Analysis

GBP/USD has been trading within a downward trend channel since turning lower once again last week. The pair gapped below support at 1.3050 at the open and has extended losses since.

A major horizontal level at 1.2989 has broken. With further support at 1.3000, this is considered to be a major area for the currency pair. It may be too early to tell if the bearish break will be sustained.

Resistance to the upside for the session ahead is seen near Thursday’s lows, roughly 1.3015. Further resistance comes in at 1.3050.

The next downside target for the pair comes in at 1.2915 which is a level that has been well respected on a daily and weekly chart.

Bottom Line

  • GBP/USD has broken below 1.3000 although volatility may slow from here with no further data releases for the day.
  • The pair trades in a clear downtrend. Rallies towards 1.3015 are likely to be met with sellers.

This article was originally posted on FX Empire