London, UK. Image source: hams Nocete, flickr.com
The pound continues to reel, and its struggles appear to be increasing. Earlier today, it was revealed that the British economy had advanced less than expected on quarter in Q3. This bolstered GBPUSD's downtrend. You can read more about it from our comprehensive analysis of the pair.
According to the latest GDP report posted by the Office for National Statistics earlier today, Britain's economic growth slowed down in the three months to September. The slump from the previous quarter was bigger than anticipated by the preliminary forecasts, which exacerbated the pound's struggles in the short term.
GBPUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
As shown on the daily chart above, the GBPUSD is developing a new major 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory. It underpins the beginning of a new massive bearish cycle.
The price action has recently concluded the second retracement leg (3-4), which was terminated at the 200-day MA (in orange). Currently, it is busy establishing the final impulse leg (4-5). Due to the fractal nature of the price action, the (4-5) impulse leg is itself structured as a 1-5 impulse wave pattern.
It is likely to head towards the 38.2 per cent Fibonacci retracement level at 1.3171 over the following weeks. Before the price reaches this psychological threshold, however, it is likely to bounce up and down between the intermediate support and resistance levels.
Those include the 400-day MA (in green) and the 500-day MA (in blue). The former underpins the support-turned-resistance level at 1.3420, whereas the latter signifies the major support at 1.3290.
The slump in economic activity bigger than expected
UK Preliminary QoQ GDP Growth Rate. Image source: TradingEconomics.com
According to the findings of the latest growth rate report, the rate of GDP expansion reached 1.3 per cent in Q3 vs 1.5 per cent expected. This marks a sizable downturn from the 5.5 per cent growth rate that was recorded in the second quarter.
As stated earlier, the news pressured the already reeling pound. Meanwhile, the market appears to have already priced in the U.S. consumer and producer inflation reports for October, which allowed the GBPUSD to sink even lower.
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