- UK Q2 GDP data printed in line.
- The cable re-tested the support zone.
- Brexit negotiations in focus.
UK data review:
- Q2 GDP growth unrevised at 0.3% QoQ basis and 1.7% YoY basis.
- Business investment broadly unchanged at £43.8 billion in Quarter 2 2017 at 0.0%.
- Services output increased by 0.5% in 2Q 2017 compared with Quarter1.
The cable rejected at 20MA(monthly) and surrender all of its last month gains and settles below 20WMA. In the G-10 currency space, the cable lost more than 3.5% as of now this August.
Following yesterday’s UK muted Q2 GDP data the cable re-tested the four-month ascending trend line, It has a parallel support finds at 1.2770 earlier swing high below this 1.2700 exists.
We believe the selling likely to pause between 1.2770-1.2700 and a mild rebound possible in the near-term. Alternatively, fails at 1.2700 could open further retracement towards 1.2650 and 1.2600.
Potential support zone remains between 1.2630-1.2550.
A move above the falling channel (blue lines) will open to 1.2860 and 1.28900 initially, later 1.2940/1.2960 expected.
The risks to this view are Jackson Hole Symposium and Brexit negotiations.
Event1: Traders focus to Yellen’s speech.
Nomura: We expect her to defend the current regulatory regime for large financial institutions. But she may also argue that the need to promote financial stability may be another reason for the FOMC to increase their targets for short-term interest rates later this year, even if inflation is slow to pick up
Event2: The second round of Brexit negotiations begins next week on August 28.
According to Adarsh Sinha at Merrill Lynch, “A speedy agreement on the ‘divorce’ bill and EU citizens’ rights would facilitate new trade deal talks, which if successful, would be bullish for GBP and potentially pave the way for UK rate hikes”.
View: Potential support zone remains between 1.2630-1.2550.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
What is your Technical View?
Do you have a different idea? Please leave us a comment and get an answer from our professional analysts.