Gbpusd drops as new-home sales surge in US and UK economy slows

GBPUSD Analysis

Performance after Monday
Period	Pct	Chg	Momentum
Monday	-0.31%	-39.6 Pips
Week to-date	-0.33%	-42.1 Pips
December	-1.28%	-162.2 Pips

Upcoming key events (London Time)

No major events for the day.

What happened lately

In the United States, there was a considerable increase in new-home sales, rising to 5.9% in November from a dramatic decline of -17.3% in October. This surge in new-home sales suggests a recovery in the housing market, potentially driven by improved consumer confidence or better financial conditions. However, this positive development is partially offset by a downturn in durable goods orders. New orders for durable goods in November declined by 1.1%, a drop from the revised October figure of 0.3%. When transportation is excluded, durable goods orders slightly decreased by 0.1%, down from 0.2% in October. Moreover, orders excluding defense fell by 0.3% compared to the previous month’s revised growth of 0.5%. Conversely, nondefense capital goods orders excluding aircraft saw an uptick of 0.7% in November, recovering from a dip of -0.2% in October. These mixed signals from the durable goods sector, as reported by the Census Bureau, indicate a complex economic environment with variances in manufacturing activity.

In the United Kingdom, the economic data indicates a slowdown in growth. The third-quarter GDP remained stagnant, with a 3-month figure showing no change, contrasting with the prior revised growth of 0.4%. The quarterly GDP analysis shows a slight decline of 0.1%, down from a 1% growth in the second quarter to 0.9% for the third quarter. These figures, reported by the Office for National Statistics, suggest that the U.K. economy is facing challenges, potentially impacted by broader global economic issues or localized economic pressures.

The GBPUSD exchange rate movement reflects recent economic developments from both sides of the Atlantic. On Monday, the GBPUSD fell by 0.31% to 1.25346. The stronger-than-expected U.S. new-home sales data likely supported the U.S. dollar, while the weakening of durable goods orders may have been insufficient to counter this effect. Simultaneously, the stagnation and slight decline in U.K. GDP figures contributed to a weakening British pound. With no major events scheduled, the current sentiment and recent data are likely influencing the currency pair’s movements. In this context, the recent economic reports are likely contributing to a more bullish outlook for the U.S. dollar against the British pound as investors weigh the growth prospects of both economies.

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What can we expect from GBPUSD today?

GBPUSD on Monday dropped -0.31% to 1.25346. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for GBPUSD looks bearish as the pair posted lower in Monday trading session.

Looking ahead for the day, immediate support level is at S1 1.25 with break below could see further selling pressure towards S2 at 1.24654. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.25880 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.25094 would indicate selling pressure.

For the week to-date, take note that GBPUSD is mixed as compared to the prior week.

Key levels to watch out:

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