The U.K.’s 1Q Gross Domestic Product (GDP) report may dampen the appeal
of the British Pound and undermine the near-term rebound in GBP/USD as
the growth rate is expected to increase an annualized 2.6% after
expanding 3.0% during the last three-months of 2014.
What’s Expected:
Why Is This Event Important:
Threats of a slower recovery may encourage the Bank of England (BoE) to adopt a more dovish tone while delivering its quarterly inflation report on May 13, and the central bank may look to further delay its normalization cycle in an effort to stem the downside risks surrounding the region.
How To Trade This Event Risk
Bearish GBP Trade: U.K. GDP Slows to Annualized 2.6% or Lower
- Need red, five-minute candle following the GDP print to consider a short British Pound trade
- If market reaction favors bearish sterling trade, short GBP/USD with two separate position
- Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
- Move stop to entry on remaining position once initial target is hit, set reasonable limit
- Need green, five-minute candle to favor a long GBP/USD trade
- Implement same setup as the bearish British Pound trade, just in reverse
GBPUSD Daily Chart
- Ongoing series of higher highs & lows favors a further advance in GBP/USD; could be at risk for a reversal as the RSI threatens the bearish momentum carried over from July 2014.
- Interim Resistance: 1.5340 (78.6% retracement) to 1.5350 (50% retracement)
- Interim Support: 1.5015 (50% expansion) to 1.5050 (50% retracement)
GBPUSD M5: 37 pips price movement by GBP - GDP news event :
The U.K. economy expanded at a slower-than-expected pace during the last three-months of 2014 as the growth rate climbed an annualized 2.7% following a 2.6% rise in the third-quarter. The lackluster recovery may encourage the Bank of England (BoE) to largely retain a wait-and-see approach in 2015, but we may see Governor Mark Carney continue to prepare U.K households and businesses for higher borrowing-costs as the central bank looks for a pickup in economic activity. The initial bearish reaction was short-lived as GBP/USD pushed above the 1.5100 handle ahead of the North America trade, with the pair ending the day at 1.5165.
