TheNews

Trading the News: U.K. Gross Domestic Product (GDP)

The U.K.’s Gross Domestic Product (GDP) report may heighten the bearish sentiment surround British Pound and fuel the near-term decline in GBP/USD should the data encourage the Bank of England (BoE) to further delay its normalization cycle.

What’s Expected:



Why Is This Event Important:

Even though BoE officials sees a ‘solid’ recovery in the U.K. and talk down bets for additional monetary support, the downside risk surrounding the economic outlook may prompt the Monetary Policy Committee (MPC) to retain its current policy throughout 2016 as the central bank struggles to achieve the 2% target for inflation.

Nevertheless, increased demand from home and abroad may encourage a stronger-than-expected GDP print, and an unexpected upward revision in the growth rate may spur a near-term rebound in GBP/USD as the fundamental outlook for the U.K. improves.

How To Trade This Event Risk

Bearish GBP Trade: U.K. Expands Annualized 1.9% or Less

• Need red, five-minute candle following the GDP report 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.

Bullish GBP Trade: GDP Report Beats Market Expectations

• Need green, five-minute candle to favor a long GBP/USD trade.
• Implement same setup as the bearish British Pound trade, just in reverse.

Potential Price Targets For The Release
GBPUSD Daily

• Even though the BoE moves away from its easing cycle, the long-term outlook for GBP/USD remains tilted to the downside as price & the Relative Strength Index (RSI) retain the bearish formations carried over from the previous year.
• Interim Resistance: 1.4910 (61.8% retracement) to 1.4930 (38.2% expansion)
• Interim Support: 1.3870 (78.6% expansion) and 1.4000 pivot

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