Pound Losing Ground after UK Q1 GDP Data

Pound Losing Ground after UK Q1 GDP Data

Soft GDP: Today, the key economic data out of the UK was the GDP data for Q1. After seeing a 0.3% growth in Q4 of 2014, economists expected a reading around 0.4% in Q1. The Office of National Statistics reported a print of 0.3% instead. While the data point missed forecasts slightly, it doe ring in the 9th consecutive quarter of growth. Consumer spending and investments were strong contributors to Q1 growth. Nonetheless, the pound is sliding after the GDP release. Let’s take a look at the GBP/USD and EUR/GBP.

GBP/USD 4H Chart 5/28
gbpusd 4h chart 5/28
(click to enlarge)

GBP/USD is continuing a decline from the 1.5815 high on the month. As price dips below 1.53, it is now below all three of the 200-, 100-, and 50-period simple moving averages, and the 4H RSI is clearly below 40. These are signs that the market has shifted way from the bullish mode that began mid-April. In the near-term, there is downside risk towards the 1.5085-1.51 support area.  A break above 1.54 would neutralize the bearish mode and keep GBP/USD neutral-bullish. Below 1.5085 however, the pair would turn from neutral to bearish.

For cable, Friday’s (5/29) US GDP data will be key. Monitor the 1.5085 low level as support and 1.54 as resistance after this data point to assess the potential direction next week.

EUR/GBP 4H Chart 5/28
eurgbp 4h chart 5/28
(click to enlarge)

EUR/GBP has been in a bearish market since 2014 but started to trade sideways in March. In May, the bears appear to have taken back the market as price retreated from 0.7483. It is in a short-term consolidation so far after finding support at 0.7055. Today’s weaker-than-expected UK GDP data should help it with further correction, but should not reverse the downtrend. Watch out for resistance at 0.7167. If price starts holding above 0.71, we might see further upside risk towards the next resistance pivot around 0.7283-0.73. Now to the downside, EUR/GBP has the low on the year at 0.7014 down to 0.70 in sight.


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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.