UK GDP from a Seasonally Adjusted basis and based on ONS data, the range hit minus 0.2 % in Q4 2012 and highs at 1.1% and 1.0% in Q3 2012 and Q2 2010. Overall, minus 0.2 to 1.1. Since Q 4 2012, GDP remained positive. Since 1955, Sesonally adjusted GDP trended positively on a picture perfect trend line. In 2009 saw a slight dip and GDP now sits at first ever highs.
In terms of Brexit from June 2016, GDP is not only irrelevant but Brexit’s affect from Seasonal fluctuations hasn’t deviated enough to reveal any difference.
GDP last reported at 0.6 is low , on the floor and severely oversold from all averages dating to 1990. GDP’s first resistance point is 1.00 then the range becomes 1.00 to 1.41. Above 1.41 then range becomes 1.41 to 1.60 and 1.70.
The target mid point is located at 0.91. GDP is going higher and my target is 0.91 to 1.22. The question to higher GDP is more the result of oversold rather than any shining light in the overall UK economy. Services at + 0.8 in Q4 2016 drove GDP from falling further as output measures were all down, AG minus 0.7, Manufacturing minus 1.7, Construction minus 0.4 and minus 1.4 for Production. UK has the potential but appears to lack the action plans. The shiny spot if any was the recent Theresa May speech as she has ability and will to move the UK forward.
GBP/USD from current price at 1.2632 must break 1.2647, 1.2652 and 1.2659 to target 1.2700, 1.2706 and 1.2750. GBP trades top of the range and a range from 1.2652 to 1.2558.
GBP must break 1.2558 to begin to consider lower and to cut through masses of supports. First breaks begin at 1.2633 and 1.2629 then 1.2596, 1.2586, 1.2573 and 1.2567.
Then comes the break point challenge at 1.2558 and 1.2481 and 1.2379. GBP/USD is built upon a base bottom at 1.2205.
I would caution to longs as range tops are here yet a positive GDP would send GBP higher. Overall however, GBP price along the curve is about correct at mid range. The BOE prefers and are masters to maintain GBP always at those neutral mid range points.
Brian Twomey, Inside the Currency Market, btwomey.com.
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