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GBP/USD Eyeing Upside Break, UK’s Jobs Report Next

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Technical analysis of Forex market

Key Highlights

  • The British Pound found support near 1.2900 and recovered against the US Dollar.
  • There is a major bullish trend line formed with support at 1.2840 on the 4-hour chart of GBP/USD.
  • The UK Gross Domestic Product in July 2018 increased 0.3% (MoM), more than the 0.2% forecast.
  • Today, the UK Claimant Count Change for August 2018 will be released, which is forecasted to post 3.6K.

GBPUSD Technical Analysis

This past week, the British Pound declined below the 1.2900 support against the US Dollar. The GBP/USD pair traded towards the 1.2800 area where buyers emerged and later the pair recovered.

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Looking at the 4-hours chart, the pair traded as low as 1.2785 and later jumped back above the 1.2900 and 1.3000 levels. It traded as high as 1.3028 and recently corrected lower. It moved below the 38.2% Fib retracement level of the last wave from the 1.2785 low to 1.3028 high.

However, declines were limited by the 1.2900 support and the 50% Fib retracement level of the last wave from the 1.2785 low to 1.3028 high. Below the 1.2900 level, there is a major bullish trend line formed with support at 1.2840 on the same chart.

Therefore, dips near the 1.2900 level, the 100 simple moving average (red, 4-hours), and the trend line remains supported. On the upside, the 1.3030 level is a major resistance along with a connecting bearish trend line with current resistance at 1.3035.

If the pair breaks the 1.3030 resistance and the trend line, there could be an upside break towards the 1.3100 and 1.3200 levels.

Fundamentally, the UK saw the release of the Gross Domestic Product for July 2018 by the National Statistics. The market was looking a growth of around 0.2% in the GDP compared with the previous month.

The actual result was better than the forecast as the GDP grew 0.3% in July 2018. More importantly, the trade balance in July 2018 posted a trade deficit of £-0.111B, much less than the market expectation of £-2.100B.

Moreover, the report added that:

UK gross domestic product (GDP) grew by 0.6% in the three months to July. GDP growth was driven by services and construction, with a small drag on growth from production. Three-month growth highest since August 2017.

Overall, the report was positive and it could help the British Pound and GBP/USD in the near term.

Economic Releases to Watch Today

  • UK Claimant Count Change August 2018 – Forecast 3.6K, versus 6.2K previous.
  • UK ILO Unemployment Rate July 2018 (3M) – Forecast 4.0%, versus 4.0% previous.
  • UK Average Earnings Including Bonus July 2018 (3Mo/Year) – Forecast +2.5%, versus +2.4% previous.
  • UK Average Earnings Excluding Bonus July 2018 (3Mo/Year) – Forecast +2.8%, versus +2.7% previous.
  • German ZEW Business Economic Sentiment Index for September 2018 – Forecast -14.1, versus -13.7 previous.
  • US Wholesale Inventories for July 2018 – Forecast +0.7%, versus +0.7% previous.