The pound was declining gradually and slowly throughout the entire session, so by the end of the day it posted significant losses. First, the sterling reacted to the macroeconomic data in the UK that turned out to be below expectations.
According to preliminary estimates, UK GDP for the second quarter grew by 22.2% from an early decline of -6.1%. Although the result is quite impressive, markets expected to see a rise of 22.5%. Besides, industrial production in the UK was expected to fall from 20.7% to 10.8%. However, it fell to 8.3% year-on-year. If we take a look at monthly data, the situation is even worse.
Thus, the UK industrial production decreased by -0.7% while analysts expected a rise of 0.5%. Therefore, the data confirmed that the recovery of the British economy is not only slow but also unstable. Of course, this had a negative effect on the pound which started to lose ground.
GDP (UK)
The economic data from the US has actually finished the pound as employment statistics in the US have once again encouraged the markets. Although the data on initial jobless claims was below expectations, it still reduced from 387K to 375K, while experts predicted a decline to 365K.
As for continuing claims for unemployment benefits, there were some surprising changes. Formally, the data came in worse than expected as analysts predicted 2,850,000 instead of the actual 2, 866,000. However, the previous reading was upwardly revised from 2,930,000 to 2,980,000. This means that the number of claims fell by 114,000 instead of the expected 80,000.
So, the US labor market continues to recover with an unprecedented reduction in the unemployment rate. Therefore, it is hardly surprising that the US dollar keeps strengthening against the pound. Today, the market is likely to trade flat since the economic calendar is mostly empty and investors have nothing to react to.
Continuing jobless claims (US):
Yesterday, the GBP/USD displayed an active bearish trend. As a result, the quote tested the local low of 1.3802 from Aug. 11.
Traders failed to hold the price below the support level of 1.3800 which resulted in the reduced volume of short positions.
The price bounced off the 1.3800 level yet the downward movement still prevailed.
Currently, the MACD indicator is moving below the zero level. This fact confirms a persistent downtrend in the market.
Outlook
Market participants will consider a further downtrend if the price settles below the level of 1.3800 on the 4-hour time frame. This will open the way towards 1.3730.
An uptrend will become relevant in case the price consolidated above the 38.2 Fibonacci level which may result in a pullback towards 1.3880.
Comprehensive indicator analysis signals a selling opportunity on short-term and intraday time frames. The downtrend that was formed on July 30 is still relevant.
InstaForex Group