After calculating a number of GDP forecasts this week, commonalities appear. What’s driving any positive GDP forecast is found at the longest term averages. Shorter term averages for DXY, NZD and GBP all calculate negative. The best of the forecasts are DXY as the target range is found between 0.50 – 0.86. The UK range is found between 0.22 – 0.91 yet 0.40 is expected as the consensus forecast. What I see is the possibility 0.4 may print higher to something in the vicinity of 0.54. Why? Viewed from the DXY range at 0.7 forecast, 0.7 falls dead in line within the range at the longer term averages. Sometime quarters factor perfectly and even perfect targets can achieve but this quarter is tough. All GDP averages are below current forecasts from 1 – 10 years.
A print higher than 0.4 sends GBP/USD higher but GBP overall on any rises is corrections within a larger downtrend. GBP/USD must break 1.4452 to head higher. Below 1.4291 holds current price from further falls.
Brian Twomey, Inside the Currency Market, btwomey.com