GBP/USD outlook: Sterling was hit further by weak UK GDP data, but key support still holds

Slobodan Drvenica Windsor Brokers

GBP/USD

GBPUSD was down over 40 pips this morning in immediate reaction to weaker than expected UK GDP data.
The price fell to the lowest in more than three months, attempting to break out of the recent four-day consolidation and pressuring pivotal 200DMA support.

The data released earlier this morning showed that Britain’s economy contracted at the fastest pace in 2023 (GDP m/m July -0.5% vs 0.5% in June and -0.2% f/c; annualized 0.0% July vs 0.9% in June).

Downbeat GDP numbers further sour the sentiment after labor data on Tuesday also fell below expectations, adding to concerns as Bank of England holds its policy meeting next week.
Weaker than expected numbers from key sectors of the UK economy are blow to hawks who advocate for more rate hikes (BOE is expected to deliver 25 basis points hike next week) though the policymakers could argue their expected decision by strong wage growth which will continue to fuel inflation (currently at 6.8% and the highest in the group of the most developed economies).

Technical picture on daily chart remains negative and fresh bearish signal is developing on 4-hr chart (Ichimoku cloud is above the price and thickening, Tenkan-sen crossed below Kijun-sen and 14-period momentum broke into negative territory).

However, bears continue to face increased headwinds from 200DMA (1.2430), which may continue to limit the downside, as markets probably look for further signals, focusing on US inflation report for August, due later today.

Res: 1.2482; 1.2534; 1.2547; 1.2608.
Sup: 1.2430; 1.2391; 1.2368; 1.2307.

Interested in GBP/USD technicals? Check out the key levels

1. R3 1.2599
2. R2 1.2565
3. R1 1.2527
PP 1.2493
1. S1 1.2456
2. S2 1.2422
3. S3 1.2385

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

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