The GBP/USD resumed to decline in the second half of Monday's London trading, as expected.
On Tuesday morning, the currency exchange rate had reached a pivot point's support level at 1.2528. The rate's short term future had two possibilities that are described below.
The British Pound depreciated against the US Dollar, following the UK GDP data set release on Monday at 08:30 GMT. The GBP/USD exchange currency rate lost 17 pips or 0.13% right after the release. The British Pound continued trading at the 1.2690 level against the Greenback
Office for National Statistics released the UK GDP data, which came out worse-than-expected of negative 0.4% compared with forecast negative 0.1%. Note, that the UK Manufacturing Production data was released at the same time.
According the official release: GDP growth showed some weakening across the latest 3 months, with the economy shrinking in the month of April mainly due to a dramatic fall in car production, with uncertainty ahead of the UK's original EU departure date leading to planned shutdowns. There was also widespread weakness across manufacturing in April, as the boost from the early completion of orders ahead of the UK's original EU departure date has faded."
UK CPI, Retail Sales and Bank of England announcements this week
This week a central bank forum is taking place in Sintra. At the forum the Bank of England Governor Mark Carney will speak at 14:00 GMT on Tuesday.
In the meantime, this week various central banks will make monetary announcements.
On Wednesday, at 18:00 GMT the Federal Reserve is making its FOMC Statement, Federal Funds Rate and Economic Projections. Afterwards, at 18:30 GMT the FOMC Press Conference will take place.
On Thursday, Bank of England will make a Rate Statement, Monetary Policy Summary and MPC Official Bank Rate Votes.
In addition, this week there will be notable macroeconomic data releases occurring.
On Wednesday, the UK CPI will be published at 08:30 GMT, and at 12:30 GMT the Canadian CPI will be out. The UK event can cause a move of up to 20 pips, and the Canadian CPI on average has caused moves near 40 base points.
On Thursday, UK Retail Sales will be out at 08:30 GMT. Although, the rate is not expected to cause a big move because the event will happen just before the Bank of England event.
GBP/USD short-term review
During Monday, the GBP/USD exchange rate reached the lower boundary of the short-term descending channel at 1.2528. During today's morning, the rate was testing the given line.From a theoretical point of view, it is expected, that a reversal north could occur in the nearest future. But it is unlikely, that, the British Pound could jump higher than 1.2587 due to the resistance of the 55-hour SMA. On the other hand, the currency pair could trade sideways, trying to breach the given channel.
However, if the given channel does not hold, it is likely, that a breakout south could occur within the following trading hours. A potential downside target is the 2018/2019 minimum at 1.2488.
Hourly Chart
On the daily candle chart one can observe that the rate is oversold, as the daily simple moving averages were located far above the current currency exchange rate.
Meanwhile, the pair still remains in a large scale descending channel pattern.
Daily chart
On Monday, 68% of total open position volume on the Swiss Foreign Exchange were in long positions.
By the middle of Tuesday's London session the sentiment was 70% long.
Meanwhile, trader set up pending orders in the 100-pip range were neutral, as 51% of orders were set to sell.