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A look at GBPUSD ahead of US GDP release

FX:GBPUSD   British Pound/U.S. Dollar
US preliminary estimate of Q1 GDP is due for release today. The growth rate is seen coming-in at 0.6% compared to previous quarter’s growth rate of 1.4%.

Q1 slowdown is seasonal

That is a marked slowdown; however, note that Q1 is usually the weakest in the US and strongest in Eurozone. Plus, the recent slowdown is well know and pretty much priced-in. Fed’s dovish tilt following December’s rate hike was largely due to domestic slowdown amid oil             prices sell-off and heightened risk from global developments.
Hence, markets are unlikely to worry much unless the GDP print is weaker-than-expected. Moreover, the possibility of a better-than-expected GDP figure is high, given the goods trade deficit narrowed sharply in March.

Furthermore, Fed’s favorite gauge of inflation – core personal consumption expenditure – is seen taking a big leap from Q4 2015 print of 1.3% to 1.9%. Anything just shy of estimates or higher-than-estimates could keep dollar bulls happy.

Also note – Bank of Japan’s (BOJ) status quo policy today may have put a temporary end to global mad rush towards negative rates. For Fed, this is good news since other central banks standing pat makes it easy for Fed to move rates higher. This again is supportive for US dollar             .

GBP/USD hourly chart

  • Pair dipped below hourly 50-MA as anticipated earlier today.
  • GBP's failure to take out strong resistance at 1.4617 despite a solid rebound from rising trend line support after Fed statement release indicates exhaustion on the part of bulls.
  • The spot appears poised to test rising trend line support again seen now around 1.4510 levels.
  • Breach of rising trend line would indicate short-term trend reversal and expose critical support around 1.4380 levels.
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