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Pound Unimpressed From Better GDP

British GDP was revised to the upside, and even better than expected. This hardly helps the Pound, that struggles under a strong resistance line.

According to the second release of British GDP (Gross Domestic Product), the economy grew by 0.3% in the fourth quarter of 2009. This is an upwards revision from the initial release that showed only 0.1% growth.

The first release was a big disappointment. The long-suffering British economy hardly emerged out of the very long recession, and also this was in doubt, hurting the Pound. A growth rate of only 0.1% could be easily revised to no growth or even another quarter of recession.

This second release is already more convincing – 0.3% growth probably won’t be erased in the final release due in a few weeks. The British economy probably emerged from the recession.

Forex market reaction

There were expectations for an upwards revision to 0.2%, and the outcome was better than expected – 0.3%. GBP/USD rose towards the release, but fell back after it. The move was from 1.5250 to 1.5315 and back down afterwards.

The reason is mostly technical: After breaching the important support line at 1.5350 on Thursday morning, this line turned into a strong line of resistance. As the Pound got close to it, stop orders sent it back down.

This important release wasn’t enough to send it higher. GBP/USD is now trading in a range between 1.5350 and 1.5230. It already went lower – 1.5189. This is another support line.

The ultimate support line is at 1.5000, a very round number that already worked as a support and resistance line beforehand. If GBP/USD manages to break above 1.5350, the next resistance line is 1.5520.

With Mervyn King’s words weighing on the Pound, it will probably continue to stay weaker not only against the dollar, but also against the Euro and the Japanese yen. EUR/GBP is on the rise and GBP/JPY is falling.

Later in the day, the second release of American GDP is due. Here, there are expectations for a downwards revision, but the situation there is much better. I’ll probably update on the impact that this release will have. Stay tuned!

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.