GBP/USD Forecast: Sterling to slide lower targeting 1.2850-1.2800 as the UK manufacturing slumps
- The UK Prime Minister Theresa May rejected opposition’s appeal to UK-wide customs union making any Brexit deal passing the parliament harder.
- The UK fourth-quarter GDP decelerated to 0.2% Q/Q after 0.6% in the three months to September period.
- The UK manufacturing output fell -0.7% in December, falling -2.1% over the year.
- Sterling dwells at the brink of 1.2900 targeting 1.2850-1.2800 next.
The GBP/USD is trading little changed on the downside at around 1.2920 after the UK Prime Minister Theresa May rejected claims from the opposition Labor party for a UK-wide customs union with the EU that would ease the Brexit tension, especially at the Irish border.
The UK fourth-quarter GDP rose 0.2% in the final quarter of 2018, decelerating from 0.6% quarterly increase in three months to September period while the GDP rose 1.3% over the year in the fourth quarter, missing the market forecast.
The UK manufacturing confirmed the fears of sharp deceleration as the manufacturing output fell -0.7% over the month while falling -2.1% over the year in December, both figures coming out fell below forecast and pressing on Sterling to slump below 1.2900 as the reaction.
Technically the GBP/USD is moving within a corrective trend after breaking the psychologically important 1.3000 and 38.2% Fibonacci retracement line of 1.2970 last week.
The technical oscillators like the Relative Strength Index (RSI) and Slow Stochastics (SS) are both pointing lower with Slow Stochastics making a bearish crossover in the Overbought territory indicating future price declines. Should the GBP/USD break below 1.2900 level representing 100-DMA, the target price is at 1.2850 and 1.28000 level representing a 50-DMA on a daily chart. On the upside, the 1.2970-1.3000 levels are expected to hold as a resistance line.
GBP/USD daily chart
Author
Mario Blascak, PhD
Independent Analyst
Dr. Mário Blaščák worked in professional finance and banking for 15 years before moving to journalism. While working for Austrian and German banks, he specialized in covering markets and macroeconomics.
