GBP/USD forms break and retest ahead of UK GDP data

The GBP/USD price made a break and retest pattern in the overnight session as investors waited for the upcoming UK GDP data. The pair rose from a low of 1.3566 to a high of 1.3615.

UK GDP data ahead

The Office of National Statistics (ONS) will publish important numbers from the UK on Wednesday. The agency will publish the latest UK GDP data. 

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Economists polled by Reuters expect the data to show that the economy did relatively well in August as more sectors reopened. This growth will likely be met with some slowdown in September as the country suffered a major oil shortage and gas prices jumped. 

The ONS will also publish the latest trade, manufacturing and industrial production, and construction output numbers. Data compiled by Investing shows that analysts expect that manufacturing production rose by 4.1% in August while industrial production rose by 3.1%. At the same time, they expect that construction output rose by 5.7%.

These numbers will come a day after the ONS published strong employment numbers from the UK. The data showed that the country’s labour market is relatively strong. The unemployment rate declined to 4.5% while the number of people filing for claims declined. Similarly, the economy added more than 243k jobs in three months to September.

The GBP/USD is therefore reacting to rising hopes that the Bank of England (BOE) will start tightening sooner than expected. The bank could start tapering its asset purchases in the coming months and then hike interest rates in early 2022. Besides, with commodity prices rising, the country’s inflation is expected to rebound soon.

GBP/USD forecast

The four-hour chart shows that the GBP/USD price made a bearish breakout on Tuesday. It managed to move below the lower side of the bullish flag pattern. Now, the pair is attempting to retest the lower side of this flag, in what is known as a break and retest pattern. 

The pair is slightly below the 38.2% Fibonacci retracement level and is along the 25-day moving average. Therefore, the GBP/USD price will likely break out lower as bears target the next key support at 1.3543.