GBPUSD Heads Up On GDP And Industrial Production Data. Will the Dollar Fight Back?

Summary:
• The GBPUSD upside prevails after the UK's economy grew as expected in the second quarter, but the dollar has artillery in the barrel.

GBPUSD stays on the ascending trajectory, boosted by positive UK macroeconomic data. The cable climbed up by 0.1 percent to trade at 1.2846 in Thursday’s European session as the market reacted to the soft UK inflation and GDP data. It now faces the next hurdle at 1.2875 which has proven to be a hard nut to crack for the last three weeks.

What’s fueling the GBPUSD upside?

The UK’s Consumer Price Index (CPI) figure came in at 2.2 percent YoY in July, below the forecast rate of 2.3 percent, and bringing it closer to the Bank of England’s target level of 2 percent. In addition, the economy grew by 0.6 percent in the second quarter of the year, matching the consensus forecast. Similarly, the year-over-year figure came in at 0.9 percent, meeting analysts’ forecasts.

Meanwhile, the GBPUSD pair is also boosted by the better-than-expected UK industrial production figures, which stood at 0.8 percent in June versus the forecast growth rate of 0.1 percent.  Meanwhile, the US dollar remains exposed after Wednesday’s US CPI data showed that the inflation was headed down, cementing expectations of a Fed rate cut in September.

Looking ahead, the US dollar could launch a fightback when US Retail Sales and Initial Jobless Claims data come out later on Thursday.

GBPUSD momentum

The 4H GBPUSD chart shows that the upside momentum currently prevails. The pair is above the middle Bollinger Band, and the Stochastic Oscillator indicator line is above the signal line, confirming the bullish control. However, it will need to stay above the psychological support level of 1.2800 to avoid a drop to bearish territory.

Support and resistance levels

 On the chart below, the GBPUSD pair looks likely to continue with the upside if the action stays above 1.2837. With the buyers in control, the first resistance will likely be at 1.2859. However, further control at that point will break that resistance and potentially push GBPUSD higher to test 1.2874. Alternatively, a move below 1.2837 will signal control by the sellers. In that case, look for the first support at 1.2823. However, the bears could breach that mark and invalidate the upside narrative if they extend their control. Also, the resulting momentum could push the pair lower to test 1.2810.