11.08.202018:37 Forex Analysis & Reviews: GBP/USD prospects based on UK economic data

UK's data on national economic growth is set to be published on Wednesday. This is a rather important event, which, as a rule, has a strong influence on the dynamics of the GBP/USD pair. Since last week, the pound has been demonstrating increased volatility, but it still cannot determine the direction of its movement. Starting from August 3, the pair storms the 31st figure almost every day, but each time it comes back to the 30th price level.

According to the D1 timeframe, every bullish win is followed by a bearish revenge. As a result, the pound sterling is marking time in the area of the 1.3050 mark. This is a kind of "parity line" to which both buyers and sellers return. Tomorrow traders will again try to swing the pendulum in one direction or another, depending on the status of the British economy.

It should be noted that on Wednesday we will not only be expecting data on UK GDP growth for the second quarter but also more recent economic data in the UK. This includes indicators of growth of the British economy in June, indicators of industrial production, processing industry, construction, and service sectors. And the more operational indicators there are in the "green zone", the more calmly traders will perceive the disastrous GDP figures for the second quarter.

Note that was in the second quarter that Britain experienced the peak of the coronavirus pandemic (like many countries in the world). The most difficult situation developed from late March to early May - the country was quarantined, and the economy was paralyzed. And tomorrow we will finally find out the adverse effects of the general lockdown: according to general forecasts of experts, the UK economy in the second quarter will collapse by a record of 20.5% in quarterly terms and by a similar record 22.5% in annual terms. But - I repeat - such a dynamic is widely expected and certainly will not come as a surprise to market participants (unless the numbers go much deeper into the negative area). Remember the results with which the US or the EU countries closed the second quarter - analysts barely had time to declare another set anti-record. And Britain is no exception.

Completely different requirements for more operational indicators. And although we will only find out the data for June, they will still be able to guide traders regarding the future prospects of the British economy. Most countries in the world fell at the same rate, but they will recover in different ways. And if the June data signals alarming trends, the pound will come under severe pressure. Moreover, against the backdrop of recent events, when the coronavirus again reminds of itself - both in Europe and in the UK.

Nevertheless, preliminary forecasts are positive. So, in June, the volume of British GDP should increase immediately by 8%, after a weak growth of up to 1.8% in May. Such a result will testify to the stable dynamics of the British economic recovery. For comparison, it should be said that in March this figure came out at the level of -5.8%, in April - at the level of -20.3%, and in May, as mentioned above, already in positive territory - at the level of 1.8 %. And if the June release compliments this puzzle with 8% gains, the pound will gain support even amid a record second-quarter decline.

The same can be said about the rest of the releases. Industrial production is set to rise by almost 10% in June (on a monthly basis); the processing industry should show similar dynamics (+ 10% m / m). The construction industry may even surprise you with a record: the volume of construction may increase by 15% at once. The service sector may have tremendous experience of negative dynamics. However, this is quite understandable, given the collapse of the tourism and restaurant business (for example, pubs in Britain opened only in early July). Therefore, if this component comes out at least at the level of forecasts, it will not have a strong influence on the mood of traders.

Thus, trading decisions on the GBP/USD pair should be based on the results of tomorrow's release. If more immediate economic indicators turn out to be in the green zone, the pound could receive significant support - even if the second-quarter figures update the anti-record. In this case, it will be possible to enter longs with the first northern target of 1.3150 - as a rule, the pair bounces down from this price level. If the price overcomes this target, the next resistance level will be the upper line of the Bollinger Bands indicator on the daily chart, which corresponds to the level of 1.3230. If all of the above indicators turn out to be worse than forecasted, then the GBP/USD pair will fall into the power of bears. In this case, we should expect the price to fall to the support level of 1.2900 (the middle line of the Bollinger Bands on the same timeframe).