GBPUSD, Daily, Weekly
Today’s U.S. reports revealed growth in GDP report up to 0.7% in Q1, which is weaker than expected and only about one-third of the 2.1% clip in Q4. In general we saw the expected weak consumption growth thanks to a big weather-hit to utilities and a lean $2.3 bln net export addition. We saw surprisingly strong gains for fixed investment led by a 22.1% mining-led surge in nonresidential construction and solid equipment and housing figures that left an expected 1.6% Q1 growth clip for real final sales. Additionally, we saw a stronger than expected pace of wage and salary growth, which consider be good news for the Fed but overall strength in ECI will be a worrying development for bond bulls as it could portend rising inflation.
The dollar gain some ground against the euro on the sound of the softer Q1 GDP print, and firmer chain price and ECI figures. EURUSD idles near 1.0900, while USDJPY topped 111.60 from near 111.71 before settling lower again. USDCAD was unmoved by the mix of U.S. and Canada data, which revealed an in-line monthly Canada GDP outcome. The pairing has been steady over 1.3630 since before the North American open.
GBPUSD on the other hand drifted lower back to 1.2900 on the release of the data but it reversed back bullish immediately. This can be explained as a possible correction low at 1.2902. On the week, Pound is near flat versus the dollar and euro, while sharply up against the yen, which has under performed this week, reflecting the recovery in global investor risk appetite.
Cable earlier logged a fresh six-week peak at 1.2957, by breaking the 50-Week EMA. Hence GBPUSD looks set to make the highest weekly close since the last week in September. In the daily chart, pair seems extending the Upper Bollinger Bands patterns, with RSI at 71 suggesting that there is scope of further strength until the overbought territory. By considering the Daily and weekly time frames, the pair prompted a Long Position, with entry at 1.2904. Hence based on ATR indicator, Target 1 was set at 1.3000, and Target 2 at 1.3100. Support has been set at 1.2770 which holds for since last week and also is the confluence of 200 day EMA.
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Andria Pichidi
Market Analyst
HotForex
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