GBP/USD Forecast: Pound Sterling holds above key support despite weak UK data

GBP/USD has been moving sideways above 1.2100 following Wednesday's decline.
The UK economy grew at a softer pace than expected in Q3.
Technical picture suggests that buyers remain on the sidelines.

Eren Sengezer FXStreet

GBP/USD has managed to stage a rebound early Thursday before going into a consolidation phase slightly above 1.2100. The pair's technical outlook shows that buyers remain uninterested and the US Dollar's market valuation is likely to drive the action in the second half of the day.

Earlier in the day, the data published by the UK's Office for National Statistics (ONS) revealed that the Gross Domestic Product (GDP) contracted by 0.3% on a quarterly basis in the third quarter. At an annualized rate, the UK economy grew by 1.9% in Q3, missing the market expectation of 2.4% by a wide margin. These figures weighed modestly on the Pound Sterling but GBP/USD didn't have a hard time holding above 1.2100.

The US economic docket will feature the third-quarter GDP. Since this data will be a revision and is expected to match the previous estimate of 2.9%, it is unlikely to trigger a significant market reaction.

The US Department of Labor will publish the weekly Initial Jobless Claims data as well but the trading action should remain subdued ahead of the Christmas holiday.

Market participants will keep a close eye on US stocks in the American session. Wall Street's three main indexes gained more than 1% on Wednesday and the US Dollar could come under selling pressure if the risk rally picks up steam later in the day.

GBP/USD Technical Analysis

GBP/USD trades slightly below the 20-period Simple Moving Average (SMA) on the four-hour chart and the Relative Strength Index (RSI) indicator stays below 50, suggesting that sellers remain in control of the pair's action.

On the downside, sellers could take action and open the door for an extended slide toward 1.2040 (200-period SMA) and 1.2000 (psychological level) in case 1.2100 (Fibonacci 23.6% retracement of the latest uptrend) is confirmed as resistance.

1.2150 (20-period SMA) aligns as initial resistance before 1.2200 (100-period SMA, 50-period SMA) and 1.2300 (psychological level, static level).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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