GBP/USD Starts Corrective Decrease Ahead of UK’s GDP Report

Key Highlights

  • GBP/USD started a strong increase above 1.2550 and climbed towards 1.2670.
  • It is correcting lower and recently traded below a bullish trend line at 1.2620 on the 4-hours chart.
  • The US Consumer Price Index could increase 0.6% in June 2020 (YoY).
  • The UK GDP is likely to grow 5% in May 2020 (MoM), up from the last -20.4%.

 

GBP/USD Technical Analysis

This past week, the British Pound gained bullish momentum above 1.2550 and 1.2600 against the US Dollar. GBP/USD traded as high as 1.2669 before it started consolidating in a range.

Looking at the 4-hours chart, the pair made two attempts to clear the 1.2670 zone, but it failed. As a result, there was a minor decline below 1.2620 and a crucial bullish trend line.

It also traded below the 23.6% Fib retracement level of the upward move from the 1.2251 low to 1.2669 high. On the downside, the first key support could be 1.2520. The main support seems to be forming near the 1.2500 level and 200 simple moving average (green, 4-hours).

The next support is close to 1.2460, the 100 simple moving average (red, 4-hours), and the 50% Fib retracement level of the upward move from the 1.2251 low to 1.2669 high. Any further losses may perhaps push the pair into a bearish zone.

On the upside, the pair must clear the 1.2650 and 1.2670 resistance levels to continue higher. The next set of hurdles is near 1.2720, above which the pair could revisit 1.2800.

Overall, GBP/USD is facing hurdles near 1.2670 and it remains at a risk of an extended downside correction. Looking at EUR/USD, the pair could accelerate higher once it settles above 1.1350 and 1.1360.

Upcoming Economic Releases

  • UK Industrial Production May 2020 (MoM) - Forecast +6.0%, versus -20.3% previous.
  • UK Manufacturing Production May 2020 (MoM) - Forecast -20.9%, versus -24.3% previous.
  • UK GDP May 2020 (MoM) - Forecast +5.0%, versus -20.4% previous.
  • German Consumer Price Index June 2020 (YoY) – Forecast +0.9%, versus +0.9% previous.
  • German Consumer Price Index June 2020 (MoM) – Forecast +0.6%, versus +0.6% previous.
  • German ZEW Business Economic Sentiment July 2020 – Forecast 60.0, versus 60.3 previous.
  • US Consumer Price Index June 2020 (MoM) – Forecast +0.5%, versus -0.1% previous.
  • US Consumer Price Index June 2020 (YoY) – Forecast +0.6%, versus +0.1% previous.
  • US Consumer Price Index Ex Food & Energy June 2020 (YoY) – Forecast +1.1%, versus +1.2% previous.