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The UK GDP Data and GBP/USD's Reaction

the Office of National Statistics released 3rd Quarter GDP for the UK, which came in with 0.7% growth compared to Q2. This was down from the 0.9% for Q2 compared to Q1, but was in-line with expectations. 

The largest contribution came from the services sector, and all four sectors grew as you can see in the chart below.


(source: Office of National Statistics; click to enlarge)

There is some concern that the European near-recessionary conditions will be a drag on the UK economy. Otherwise, the GDP data is still decent despite sliding from the 0.9% in Q2, which was incidentally the strongest q/q reading since Q4 2012, when it was also 0.9%. 


(source: forexfactory.com; click to enlarge)

The GBP/USD rallied after the release, actually breaking out of a triangle congestion. However, if price fails to break above 1.6080, it would have failed to make a significant higher high, and thus this week's bearish near-term trend would still be intact, especially if the 1H RSI holds below 60 as well, which shows maintenance of the bearish momentum this week. 

A break above 1.6080 suggests some further bullish correction in the short-term, especially if the RSI pops up above 60. 

GBP/USD 1H Chart 10/24
(click to enlarge)

Now, we can see in the 1H chart that the initial reaction was already faded. However, this counter attack is testing the broken triangle, and the triangle has so far held up. However, a break below 1.6020 would mean the prevailing bullish attempt was a false breakout, which translates to a bearish signal. After all, the medium-term trend since the 1.7191 high on the year in July is still bearish, and its not like the GDP data surprised to the upside, so I would still prefer the bearish outlook, aside from some near-term, intrasession correction.