- GBP/USD has been fluctuating in a narrow channel at the beginning of the week.
- GDP in the UK grew unexpectedly in October.
- The pair could have a hard time finding direction in the short term.
GBP/USD has started the new week in an indecisive manner with market participants refraining from making large bets ahead of the high-tier data releases and all-important central bank decisions. The pair's short-term technical outlook points to a loss of bullish momentum but it would be surprising to see a significant move in either direction in the remainder of the day.
Earlier in the day, the data published by the UK's Office for National Statistics (ONS) revealed that Gross Domestic Product (GDP) grew by 0.5% on a monthly basis in October following September's 0.6% contraction. This reading came in much better than the market expectation for a contraction of 0.1% but the positive impact of the upbeat GDP data on the Pound Sterling remained short-lived.
Following the GDP data, UK Finance Minster Jeremy Hunt told BBC News that the UK economy was likely to get worse before it gets better.
Meanwhile, the UK's FTSE 100 Index trades modestly lower on the day and the US stock index futures hold flat, pointing to a neutral market mood on Monday.
The US economic docket will not offer any high-impact data releases. The 10-year US Treasury note auction could impact the US Dollar's valuation in the American session but the pair is likely to extend its consolidation at least until tomorrow's UK jobs data and US inflation report.
GBP/USD Technical Analysis
GBP/USD managed to stage a rebound following the earlier decline and returned above the ascending trend line coming from early December. It's worth noting, however, the Relative Strength (RSI) indicator on the four-hour chart stays flat slightly above 50, suggesting that the pair is struggling to gather bullish momentum.
On the upside, 1.2300 (static level, psychological level) aligns as initial resistance before 1.2350 (static level) and 1.2400 (psychological level).
Supports are located at 1.2230 (20-period Simple Moving Average (SMA) on the four-hour chart), 1.2200 (psychological level, 50-period SMA) and 1.2150 (static level).
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