09:22, 28 November

Consolidates Below 1.30 as U.K. Economy Avoids Recession

For the last six weeks or so the GBPUSD has traded in a narrow range consolidating under resistance at 1.30, which has become a level of significance. Earlier in the range, the GBPUSD eased ever so slightly from a five month high just above 1.30 after smashing through the key 1.25 level which has resisted prices strongly for around a month. It had also received some support from 1.28 during this period of consolidation. It will be interesting to see how long the selling pressure remains at 1.30 or whether the sterling eases away and returns to previous levels closer to 1.25.
The 1.25 level may now reverse roles and provide some support should the sterling decline from its current highs. It may also use this current consolidation period as a base for higher prices as it may look to test the resistance at 1.30.

Prior to the surge higher to above 1.30, it had settled right around the 1.23 level after falling away from the key 1.25 level, where it met stiff resistance for nearly two weeks. Just prior to the resistance at 1.25, the GBPUSD enjoyed a strong surge higher to a one month high above 1.25, but was sold down strongly at anything above that level, whilst the resistance above at 1.27 loomed like a dark cloud – a level that has now also been cleared. Throughout August the GBPUSD was able to consolidate and receive solid support off the 1.20 level, allowing it to stop the rot and take a breather from its drastic falls from earlier in the year when it was trading above 1.33.

In late July, the GBPUSD fell heavily from 1.24, although it had been declining for several weeks after falling through the key 1.27 level. It was only at the end of June that the GBPUSD reached a one month high near 1.28 before its steady but strong decline in the time since. Significantly through most of May, the GBPUSD fell sharply from the key level at 1.32 down to the five month low before the recent consolidation around 1.27 and fall down to 1.25.

A few weeks ago official data showed that the British economy had enjoyed third-quarter gross domestic product (GDP) at 0.3%, which allowed it to avoid a technical recession, having contracted by 0.2% in the 2nd quarter.  Disappointingly, on a year-on-year basis, third-quarter growth slowed to 1%, which was its slowest rate of expansion since 2010.  Generally the figures have been considered disappointing.  Manufacturing data, industrial output and construction activity for September, all contracted with the only one bucking the trend was services output which was flat.  The Bank of England has said recently that trend growth in the U.K. was currently about half of that in 2018.