GBP/USD Tumbling Toward 1.20 Again After A Sharp Downturn
The GBP/USD recovered for about a week after falling to its lowest level since mid-March, reaching about 1.2035 early last week. The GBP/USD pair maintained its gains until yesterday, following the US CPI inflation report, when it was trading around 1.2350. The pair extended its upward trend early this week but, there was a significant lack of strong bullish momentum ahead of the 150 pip bearish reversal, signaling the need for careful positioning before expecting the recent rebound to be extended.
The GBP/USD pair’s upward potential was limited nonetheless by predictions that the Bank of England (BoE) would continue its present stance in November. Notably, the Bank of England suddenly interrupted its rate-hiking cycle in September and provided little indicators of its intention to do so.
On the daily chart, we can see that GBP/USD was at a major resistance position where the previous swing level met the 200 daily SMA (purple). Sellers came in with more confidence and a superior risk-reward arrangement to position for another selloff into new lows. Buyers, on the other hand, should have pushed the price breaking higher in order to invalidate the bearish setup and reverse the trend.
But, yesterday there were two negative events for this pair, which sent it tumbling below 1.22. The main event for the day was the US CPI inflation which came above expectations. Although the UK GDP report for August which showed that the economy returned to growth after the contraction in July.
UK August GDP Report Released by ONS – 12 October 2023
- August monthly GDP MoM +0.2% vs +0.2% expected
- July GDP MoM was -0.5%; revised to -0.6%
- GDP YoY +0.5% vs +0.5% expected
- July GDP YoY was 0.0%; revised to +0.3%
A rebound in services sector activity (+0.30%) was the main contributor to the monthly growth in August, while there were declining contributions in both production (-0.09%) and construction (-0.03%). Overall services output improved by 0.4% on the month after a fall of 0.6% in July with the largest drivers of growth being professional, scientific and technical activities, and education.
GBP/USD Live Chart
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