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British growth for the first quarter was revised to 0.3%. GBP/USD rises, but the initial gains were limited and erased quickly. Will the Pound make a real recovery? Update on this vulnerable pair (including technical levels).

The initial release of British GDP for Q1 of 2010 was very disappointing – the growth rate was only 0.2%, half of early expectations, and the Pound suffered. This was only the second quarter of growth since the financial crisis, and it was fragile like Q4 of 2009.

But similar to the previous quarter, also here, the second release already proved better. The upgrade from 0.2% to 0.3% was expected by economists, but this still helped GBP/USD make a small rise from 1.4280 to 1.4305 after the release. But this modest 25 pip gain was quickly erased, and the pair returned to 1.4280, and more downside risk is seen.

The Pound, like the Euro, opened the week with a drop. The worries about the European debt issues, that might infect Britain as well, and the high tension between North and South Korea trigger more risk aversive trading. GBP/USD opened the week at 1.4440 and fell to 1.4280 before the release of the GDP.

GBP/USD Technical levels

At these levels, immediate support is found at 1.4230, but this isn’t a strong line of support. Lower, the fresh low of 1.4130, set just last week, provides stronger support. Further deterioration in the Korean peninsula or Europe could send the Pound towards 1.38, which used to be a support line over a year ago. The ultimate support line is the multi-decade low of 1.35.

If the markets calm down and risk appetite returns to the markets, GBP/USD will find minor resistance at 1.44, and further, stronger resistance at 1.45. The next barrier is at 1.4780. This line held the pair a few months ago, and when it was breached, the Pound collapsed. Now it serves as a resistance line.

The GfK Consumer Confidence, published later this week, will probably show that Brits are more pessimistic, adding to the Pound’s weakness. The action continues.

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