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0.3% GDP Plunge Triggers Head and Shoulders Top, Sterling's 1.3420 Defense Line Under Pressure
Forex
Summary:
Released today, the UK April GDP data shows an unexpected decline, far below market expectations, which has caused the British pound to come under pressure and weaken. Technical analysis suggests a potential head and shoulders top formation.
Sell
CLOSEDGBPUSD
End Time
1.35692
Entry Price
1.32400
TP
1.36200
SL
1.33707 -0.00148 -0.11%
508
Points
Loss
1.32400
TP
1.36201
CLOSING
1.35692
Entry Price
1.36200
SL
Fundamentals
During today's Asian trading session, the UK's latest April GDP data plunged 0.3%, marking the largest monthly decline since October 2023 and falling well short of the market's expectation of a small 0.1% decline. Although the UK economy grew 0.7% year-on-year in Q1, the weakness in April signals a weak start to Q2, with both the service sector and manufacturing sector slowing. Meanwhile, retail sales and PMI both dropped below the boom-bust line, indicating persistent weakness in domestic demand.
Meanwhile, UK exports to the US have been significantly impacted by the Trump administration's new tariff policies. In April, UK goods exports to the US fell by £2 billion (US$2.71 billion), the largest monthly decline since records began in 1997, exacerbating pressure on export-oriented industries.
Following the GDP data, the market increased bets on the Bank of England (BoE) cutting interest rates, with expectations of a total 52 basis point reduction this year. According to a recent Reuters survey, economists expect the BoE to cut rates by 25 basis points in August and again in the fourth quarter of 2025, bringing the interest rate down to 3.75%.
Technical Analysis
As of the European trading session today, the GBP/USD has dropped sharply due to the impact of the April GDP decline, currently trading at 1.3570.
Based on the 4-hour chart, the candlestick structure of GBP/USD shows signs of forming the right shoulder of a head and shoulders top pattern. If the right shoulder is confirmed, the likelihood of a decline in GBP/USD in the near term will increase significantly. If the price subsequently breaks below the neckline at 1.3420, further downside potential will open up.
Trading Recommendations
Trading direction: Sell
Entry price: 1.3570
Target price: 1.3240
Stop loss: 1.3620
Valid Until: June 26, 2025, 23:00:00
Support: 1.3456/1.3415
Resistance: 1.3593/1.3616
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