Trading news

GBP/USD Breaking out of Symmetric Triangle Pattern - Trade Idea!  

The GBP/USD pair was closed at 1.30311 after placing a high of 1.30674 and a low of 1.30053. Overall the movement of GBP/USD pair remained bearish throughout the day. The Pound US Dollar exchange rate remained bearish on Wednesday and reached 1.300 level, although the US dollar remained under pressure. The US Dollar Index fell on Wednesday and reached 93.4 level. The decline in the GBP/USD pair was derived by the massive contraction of the UK economy in the second quarter of this year.

At 11:00 GMT, the data of Gross Domestic Product from Great Britain showed that the UK economy was expanded in June by about 8.7% from May’s 2.4% and surpassed the estimate of 8.1%. The Prelim GDP data for the second quarter showed that the UK economy was contracted by 20.4% against the expected 20.5% and the previous 2.2%. It was the biggest contraction seen in any country in the second quarter, and that fact weighed heavily on GBP/USD pair despite the data coming in favor of single currency Sterling.

However, the losses in the GBP/USD pair remained limited due to the better than expected other macroeconomic data from the UK. The Industrial Production for June rose to 9.3% from the expected 9.2% and supported British Pound. The Manufacturing Production in June rose to 11.0% from the forecasted 10.0% and supported GBP.

The Prelim Business Investment for the second quarter dropped to -31.4% from the -30.0% estimated and weighed on British Pound and added further in the losses of GBP/USD pair. At 11:02 GMT, the Construction Output for June rose to 23.5% from the anticipated 15.1% and supported Pound. The Goods Trade Balance in June declined to -5.1B against the expected -4.5B and weighed on British Pound.

On the US front, the Consumer Price Index for July came in as 0.6% against the forecasted 0.3% and supported the US dollar. The Core Consumer Price Index also rose to 0.6%in July against the estimated 0.2% and supported the US dollar. The better than expected macroeconomic data from the US gave strength to the US dollar in American session and added in the losses of GBP/USD pair.

The largest contraction by any major economy so far was recorded in the British economy at the time when the coronavirus restrictions were the strictest. The sentiment remained under pressure as the markets expect a wave of unemployment to hit the economy later this year after the furlough scheme will expire in October.

Britain’s Chancellor, Rishi Sunak, also noted there were some visible signs that the economy has begun to recover in June. He also added that there was too much uncertainty to know if the country would have a swift V-shaped recovery. On Brexit front, Mr. Sunak said that progress was being made in several areas of trade negotiations. However, he also added that there were also some gaps in a couple of big issues between the UK and the EU. If reports suggest that EU & UK were making progress despite the differences, the GBP/USD pair will edge higher.



Daily Technical Levels

Support Resistance

1.3002 1.3066

1.2971 1.3099

1.2938 1.3130

Pivot point: 1.3035

During the European session, the GBP/USD continued trading within a symmetric triangle pattern, which supports the pair at 1.3015 along with resistance at 1.3096 level. On the higher side, the GBP/USD pair may continue trading higher until 1.3135 upon the breakout of 1.3136 level. The symmetric triangle pattern has a tendency to break out on either side of the market, as it shows indecision among traders typically before the release of any major news. Investors will be waiting for the U.S. Jobless claims data, as the positive figures may lead to GBP/USD prices higher towards 1.3136 level. Good luck! 

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Thursday, 13 Aug, 2020 / 11:45

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