GBP/USD – 20-Day SMA holding the pair ahead of Bearish Pressure
GBP/USD Fundamental Analysis
In the early European session, the Office for National Statistics (ONS) reported preliminary GDP data for the December and the fourth quarter (Q4) of 2022.
The most recent figure indicates that UK GDP dropped by 0.5% month-on-month in December rather than the 0.3% predicted. Additionally, the ONS reported that the economy expanded by 0% in the last quarter of the year because GDP remained constant between the third and fourth quarters, indicating that the UK nearly avoided an economic downturn.
As news broke that the UK economy fell more than predicted in December, the British Pound managed to hold gain and showed bullish signs.
Furthermore, on the US side, the University of Michigan will issue its preliminary UoM Consumer Sentiment report in the latter part of this day. It is anticipated that the US Prelim UoM Consumer Sentiment will increase from 64.9 points to 65.0, which might be advantageous for the USD.
The preliminary UoM inflation expectations and the remarks of FOMC member Waller, scheduled for today, may also spark some activity. It serves as the primary indicator of economic health and the broader measure of economic activity. Therefore, market players are waiting for the releases before making their next move.
The forex pair GBP/USD entered a consolidation phase around 1.2100 at the end of the European session. The rising potential of the pair appears to be limited by the UK’s mixed macroeconomic data releases and weak market risk sentiment.
GBP/USD Technical Analysis
The technical outlook of the H4 chart of GBP/USD suggests that the currency pair might be on their way to entering the descending channel. Currently, the price is above the 20-Day Simple Moving Average (SMA), which is at 1.20865. Any break below this level into the descending channel will trigger a downside momentum. Further downfall would drag down the prices below the 1.20100 level.
If we take a look at the technical Indicators, the Moving Average Convergence and Divergence (MACD) indicator with fading histogram and joining the red signal line suggests market indecision. Whereas the Stochastic Oscillator has entered the oversold level, suggesting the fall might have reached its limit.
Overall, the outlook suggests a fall below the 1.20100 level in case the immediate support of the 20-Day SMA at 1.20865 breaks. Therefore, this 1.20865 level is crucial to watch at the moment.
Daily Technical Levels:
| Support | Resistance |
| 1.2053 | 1.2192 |
| 1.1985 | 1.2263 |
| 1.1914 | 1.2331 |
Pivot Point: 1.2124
