GBP/USD drooping under the weight of Brexit fears ahead of UK GDP figures

Sterling declines as bond yields drive USD higher.
Brexit continues to bog down GBP/USD buying potential.

Joshua Gibson FXStreet

GBP/USD is heading into Thursday trading on its backfoot, testing Wednesday's low of 1.3905.

Sterling bulls have worked hard to push the pair up with nothing to show for it except for brief volatility spikes, as GBP/USD has continued to sink lower for the past four trading days. With China back on in the markets after taking the first half of the week off to celebrate Chinese New Year, bearish pressure remains high as commodities and equities retreat in another fear-fueled round of risk aversion.

Wednesday saw the release of the FOMC's meeting minutes and an increasingly positive outlook on the US economy coupled with increased projections for inflation expansion sent equities tumbling and bond yields back up to recent highs, reinvigorating the US Dollar's recent recovery and sending the USD higher once again against the major currency bloc.

The UK will see GDP figures at 09:30 today, with median forecasts anticipating figures to come in at 1.5% for the headline figure, unchanged from the previous reading.

Despite the Bank of England (BOE) gearing up to increase interest rates as soon as May in the face of the UK's own growth figures, the GBP is left on tenuous footing as Brexit continues to weigh down financial markets, with a growing uproar from UK businesses seeking clarification on trade rules post-Brexit, and Prime Minister Theresa May's recently published negotiation plan drawing a furor within the UK's Parliament.

GBP/USD Technicals

With the pair down from the recent swing high of 1.4144, the GBP/USD is now testing into the 1.3900 handle heading into London markets; the overall bullish trend remains intact, but the window of opportunity is closing with the 34 EMA acting as support from 1.3885, and the rejection of 1.4144 putting in a lower high as the Dollar surges. Support levels are priced in at 1.3852, 1.3796, and 1.3764 while a resistance zone builds above current prices from 1.4064 to 1.4140.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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