GBP/USD - Focus on growth differential

Omkar Godbole FXStreet Contributor

US President Trump's "strong dollar" comment saw the GBP/USD pair drop sharply from 1.4242 to 1.4083 in the overnight trade. The move added credence to the bearish price-RSI divergence on the 1-hour time frame and created a bearish pin-bar like-candle on the daily chart.

However, the pair found bids around 1.41 levels in Asia and moved higher to 1.4192. As of writing, the currency pair is trading at 1.4180. So, the spot is still down 1.15 percent from the previous day's high of 1.4345.

That said, the pair could have another go at 1.4345 levels if the US-UK GDP differential narrows in favor of the GBP.

UK Q4 GDP due at 09:30 GMT is expected to show the economy expanded 0.4% over the quarter in Q4 2017 with an annual growth rate decelerating to 1.5% y/y from 1.7% y/y for the previous quarter. As for US GDP, the market is looking for growth to ease to 3.0% in Q4 from 3.2%.

An oversold USD could find bids, yielding a drop in GBP/USD if US Q4 GDP beats estimates. However, the downside could be limited if the UK GDP paints an upbeat picture of the economy.

GBP/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, " The 4 hours chart shows that the pair is currently in a consolidative stage near its highs, holding above a firmly bullish 20 SMA, over 150 pips below the current level. Technical indicators in the mentioned chart have lost their strength upward but hold within the overbought territory, increasing chances of a correction, particularly if the pair break below 1.4220, the immediate support."

Support levels: 1.4220 1.4165 1.4120

Resistance levels: 1.4300 1.4345 1.4390

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bullish	Neutral	Shrinking
1H	Bearish	Neutral	High
4H	Bullish	Neutral	High
1D	Bullish	Neutral	High
1W		Overbought	Expanding
Updated Jan 26, 03:00 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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