The Cable Holds Steady as Traders Turn from UK GDP to U.S. New Home Sales

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GBP/USD Elliott Wave Analysis

The Cable Holds Steady as Traders Turn from UK GDP to U.S. New Home Sales

Post-gross domestic product (GDP) releases earlier today, the GBPUSD continues to consolidate within yesterday’s trading range of 1.6642-1.6725. The two figures, GDP (YoY) and GDP (QoQ), came in as expected, at 2.7% and 0.7% respectively. Elsewhere, total business investment picked up, with a 2.4% and an 8.5% increase QoQ and YoY respectively, while private consumption came in at 0.4%, narrowly behind the forecast 0.6%.

Many traders have been looking for the top in the pair, which currently sits at its highest levels since early 2011, and last week’s pullback from highs of 1.6822 reaching January resistance fueled speculation that the Sterling had finally topped out against its U.S. counterpart. A worse than expected GDP release in the UK would have supported this bias and could have catalyzed a break below January highs, offering up, at least from a technical perspective, some validation of the dollar bulls’ opinions. Without this however, the key level to watch now will be the Monday 17 close at 1.6713.

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As far as market-moving data is concerned, the UK is finished for the week, whereas the U.S. still has a number of high profile announcements slated for release. The first comes this afternoon, with U.S. January new home sales forecast at -3.4%. A better than expected release for this figure may push the cable towards the aforementioned close, while a worse than expected release will likely catalyze a downside break through yesterday’s low.

Looking a little farther forward, and staying with the U.S. side of the GBPUSD coin, the U.S. will release its own GDP figure (prelim QoQ) at 13:30 GMT this coming Friday. Always a market mover, this release could be the driving factor behind the continuation, or reversal, of the Cable. Any sign of economic improvement may be all that is required to finally overturn the yearlong strength of the sterling and initiate a reversal that would likely set the tone for the coming months.

To contact the reporter of this story: Samuel Rae at samuel@forexminute.com