British Pound to US Dollar exchange rate surged recently after the UK GDP report, but it looks like GBP/USD is forming a top, as there is a monster resistance on daily chart.
It looks like the recent sell-off in the US Dollar might stall, as it has started to gain traction against the Euro[1], Australian Dollar, British Pound, NZD[2] and the Japanese Yen. We need to see whether the current move is a correction or a trend change for the greenback.
British Pound to Dollar rate heading for a decline?
The GBP/USD pair recently traded towards the 1.4450-80 resistance area[3], which represents a major barrier for more upsides. If we look at the daily chart of the GBP/USD pair, there is a bearish trend line formed, which prevented the recent upside break.
There is a chance that the British Pound may be forming a top near the trend line resistance[4] against the US Dollar, and may start to move down once again. Yesterday's daily candle was also a sign of a short-term top.
On the other hand, a break above the trend line resistance could take the pair towards the 100-day simple moving average[5], which is also around the 1.236 expansion of the last fib leg from the 1.4513 high to 1.4060 low.
However, one positive point to note is the fact that the daily RSI[6] is above the 50 level, calling for more gains in the British Pound.
UK Gross Domestic Product (GDP) Impact on British Pound
Today, the final estimate of UK Gross Domestic Product (GDP) for the fourth quarter 2015 was released by the National Statistics[7] during the European session.
The forecast was slated for a rise of 0.5% in the GDP in the fourth quarter[8] 2015, compared with the previous quarter. However, the outcome exceeded the market forecast, as the final estimate of UK GDP came in at 0.6%. The last reading was also revised up from 0.5% to 0.6%.
The report also added that "Between 2014 and 2015, GDP in volume terms increased by 2.2%, unrevised from the previous estimate".
Overall, the report was positive, but we need to see whether the British Pound can gain further or not. In an initial reaction it was seen trading higher, but can the current trend continue?
Well, I think it lot depends on whether the bulls can manage to break the highlighted trend line and resistance area or not.
GBP/USD Support Levels
1.4340 And 1.4300
GBP/USD Resistance Levels
1.4450 And 1.4500
References
- ^ gain traction against the Euro (www.fxnewscall.com)
- ^ NZD (www.fxnewscall.com)
- ^ resistance area (www.investopedia.com)
- ^ trend line resistance (www.fxnewscall.com)
- ^ simple moving average (www.investopedia.com)
- ^ RSI (www.investopedia.com)
- ^ National Statistics (www.statistics.gov.uk)
- ^ fourth quarter (www.investopedia.com)
