GBP/USD Resumes Downward Trend After GDP Figures

GBP/USD has been declining for several months now as the USD began to gain traction, bringing the price close to 1.20. Despite the fact that the UK economy is in recession, this pair has established a bottom and produced a strong bullish reversal last week, particularly after FED’s meeting which didn’t indicate another rate hike to come, but the bullish reversal has faded and the GBP is heading toward 1.20 again.

The rise in US bond rates as a result of global concerns has supported the USD and in late October 10-year notes soared above 5%, but last week they pulled back below 4.50%, which was a factor in the USD retreat and the surge in GBP/USD above 1.24. Buyers ran into the 200 SMA (purple) on Monday which turned into resistance and the price formed an upside-down hammer candlestick, which is a bearish reversing signal after the climb. Then the reversal came and we have seen four bearish daily candlesticks.

Earlier today the UK GDP report for September and for Q3 was released, with expectations for a contraction in the previous quarter.  But the readings tilted on the positive side with some higher figures for September, although the GBP continues the slide lower.

UK September and Q3 GDP Reports

• GDP (QoQ) (Q3) Actual: 0.0% vs Expected: -0.1% Previous: 0.2%
• GDP (YoY) (Q3) Actual: 0.6% vs Expected: 0.5% Previous: 0.6%
• GDP (YoY) (Sep) Actual: 1.3% vs Expected: 1.0% Previous: 0.5%

GBP/USD Live Chart